Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — TRANSPORT

Road Safety Publicity

Mr. Wardle: asked the Secretary of State for Transport what are his future plans for road safety publicity.

The Secretary of State for Transport (Mr. Paul Channon): A top priority is to reduce the number of road casualties. To do so we need the most effective mix and use of measures, including publicity. For this reason, an interdepartmental review of road safety was set up. This looked, among other things, at the role of road safety publicity in future. A copy of the review is in the Library. I shall be circulating it more widely to interested organisations next week.

Mr. Wardle: I am grateful to my right hon. Friend for that reply. Is he satisfied that enough is being done to bring down the number of road casualties?

Mr. Channon: We shall never be satisfied, and we must not be complacent. but at the moment the figures are extremely encouraging. The latest figures for the first quarter of 1987, compared with the first quarter last year,

show that deaths are down by 12 per cent., serious injuries are down by 13 per cent., and the casualty rate per mile is down by 13 per cent. That is very good news. It is not good enough, but it is good news.

Mr. Higgins: Does my right hon. Friend recall that some time ago his Department held a "Think Bike" publicity campaign directed at motorists? In view of the appalling standard of motor cycle riding in London, which means that motor cyclists often disregard central barriers and squeeze in between cars and barriers, will my right hon. Friend consider whether a similar advertising campaign should be directed at motor cyclists, to seek to ensure better safety records?

Mr. Channon: I shall certainly consider what my right hon. Friend has said. It is a very interesting idea. In fact, a set of leaflets on motor cycling and safety is to be launched this week as part of the Cheshire motor cycling day, which should be useful to those taking up motory cycle riding. I shall bear in mind what my right hon. Friend has suggested.

Mr. Tony Banks: Has the Secretary of State any information about the number of road accidents caused by people using car telephones? Will he consider banning the use of hand-held car telephones? Clearly they must be a contributory factor in road accidents. I should be very interested to know the thinking of the Secretary of State on this matter.

Mr. Channon: I do not think that we have any figures directly related to the number of people using car telephones when accidents occur. However, it is obviously extremely dangerous to use a car telephone while driving, and the police take a very serious view of the matter. Furthermore, I should have thought that anyone who could afford a car telephone could afford a remote microphone.

Sir Philip Goodhart: Will my right hon. Friend bear in mind the recommendation of the Select Committee on Transport that road safety publicity would be much improved if his Department would improve the collection and publicity of road accident statistics?

Mr. Channon: Yes, Sir. I shall certainly do that. I have announced some road statistics today and I hope my hon. Friend will study the interdepartmental review. I should very much welcome his views on it.

Drink-Driving Campaign

Mr. Hannam: asked the Secretary of State for Transport if he will make a statement on the representions he has received on the current campaign against drinking and driving.

The Under-Secretary of State for Transport (Mr. Peter Bottomley): The effective advertising has been warmly welcomed.
I thank the media for their support. I hope they will continue to raise awareness. As my right hon. Friend has just said, we need everyone in society to highlight the dangers and stop themselves and others, wrecking people's lives.
There are suggestions of tougher police, court and legislative action. These are possibilities. The first requirement is to change public attitudes to the unacceptable crime of drinking and driving.

Mr. Hannam: I congratulate my hon. Friend on his efforts to curb drink-driving. What will be the main feature of the next campaign and will he pay particular attention to the need to educate the organisers of parties and functions to ensure that plenty of non-alcoholic drinks are available? That would prevent much unwitting over-indulgence.

Mr. Bottomley: I completely agree with my hon. Friend. We are working on further new major initiatives with the Brewers Society. Drivers need to see and notice low-alcohol or non-alcoholic drinks in pubs, clubs, restaurants and at functions on private premises. However, I should prefer people to choose not to drink before driving. They should make the choice rather than have the Government or the law make the choice for them.

Mr. Beith: Would it not be the height of irresponsibility to make fundamental changes in the licensing law without first being certain that it would not further contribute to the problem of drinking and driving? Is the Minister taking part in serious consultations on this aspect, or is there no overall Government policy on alcohol?

Mr. Bottomley: There is overall Government policy on alcohol, and it is likely to be further refined. I shall send the hon. Gentleman the excellent article by Godfrey Smith in The Sunday Times two weeks ago, rightly approving of the remarks which I made in public that drinking alcohol for two hours in a pub before driving is wrong and that extending drinking time to four hours or having flexible licensing hours does not make much difference to the basic decision that drivers should not drink alcohol.

Sir Bernard Braine: Is my hon. Friend concerned that the proposal to extend drinking in public houses throughout the afternoon may bring people who have drunk too much on to the road at peak travel time, particularly when many children are coming home from school?

Mr. Bottomley: My right hon. Friend, like the hon. Member for Berwick-upon-Tweed (Mr. Beith), raises a serious issue. The key issue is whether drinking alcohol before driving continues to be socially acceptable. I believe

that it is not. The precise points raised by my right hon. Friend and the hon. Gentleman are matters for the Home Office.

Mr. Boyes: I welcome the Minister's remarks about drinking and driving. Will he consider introducing random breath tests? Has he had an opportunity to study the effects of random breath testing in other countries? I understand that there has been a good effect in reducing the number of deaths on the road and the number of convictions for drinking and driving. Will the hon. Gentleman consider preparing a report on that matter?

Mr. Bottomley: It is worth the House remembering that some countries which brought in random breath tests and imposed stricter limits than those that we have by law found that they did not have much effect until the public attitude changed. I ask every hon. Member to concentrate on changing the public attitude to the unacceptable crime of drinking and driving rather than to use a change of law as a talisman and substitute for each of us moderating and, if necessary, changing our behaviour.

North Devon Link Road

Mr. Speller: asked the Secretary of State for Transport if he is satisfied with progress on the construction of the north Devon link road; and if he will make a statement.

Mr. Peter Bottomley: We are making excellent progress towards completing this new 47-mile length of new road for the summer of 1989.

Mr. Speller: Is my hon. Friend aware, first, that better roads are safer roads and, secondly, that the west country is duly grateful to this Administration for at long last giving it the roads that it needs? Will my hon. Friend let me know when we may expect a start on the remaining portions of the north Devon link road?

Mr. Bottomley: I am grateful to my hon. Friend. The contract for the next section has been let and we hope that work on the Barnstaple bypass will start within a few weeks.

Miss Emma Nicholson: We are most grateful for the Bideford bridge in the constituency of Torridge and Devon, West which joins the north Devon link road. Can my hon. Friend confirm the date on which the road will be completed?

Mr. Bottomley: We hope that the road will be open by the peak summer holiday season of 1989. I know that if we can achieve that it will be as welcome as the east of Okehampton stretch, which we opened last week.

Children's Fares

Mr. Pike: asked the Secretary of State for Transport whether his Department has assessed the impact of the Transport Act 1985 on children's fares; and if he will make a statement.

The Minister of State, Department of Transport (Mr. David Mitchell): Some local authorities have used the powers introduced under the Transport Act 1985 to provide for new or improved children's concessions. But in most areas there has been no change.

Mr. Pike: Is the Minister aware of the threat posed to the future of children's fares? In Lancashire, Ribble Motor


Services is saying to Lancashire county council, "Unless you pay for this concession, we will make all children pay the full fare." This matter is to he discussed again on 28 July. Is this not an appalling situation? Will the Government give a clear indication that transport undertakings must give children a fare reduction?

Mr. Mitchell: Our information does not confirm that there has been any widespread withdrawal of such concessions. I know of only two operators who have withdrawn children's fares, and one has since reintroduced them. Ribble Motor Services has threatened to withdraw child fares, but the matter is to he discussed on 28 July. I suggest that we wait until then. It may help the hon. Gentleman if I add that new schemes introduced as a result of the Act have operated in Cleveland, East Sussex and Milton Keynes.

Mr. Brandon-Bravo: Is my hon. Friend aware of the discrimination against children in the private sector of education? Before deregulation, all children in the county of Nottinghamshire were allowed a concessionary fare. As an act of political vandalism, our county discriminates and will now give that concession only to children in the maintained sector. Is that not disgraceful?

Mr. Mitchell: I agree with my hon. Friend that it is disgraceful that there should be such regrettable discrimination. The matter rests with the local authority. Perhaps my hon. Friend will succeed in changing control of it at the next election.

Mr. Worthington: Does the Minister also agree that it is deplorable for a private bus company, as has happened in Strathclyde, to withdraw that concessionary fare?

Mr. Mitchell: That is a commercial decision for the operator concerned. Under the Transport Act 1985 the local authority is empowered to make arrangements for substitution.

Mr. Adley: Does my hon. Friend agree that the impact on children's fares under the Transport Act would be as nothing compared with the impact on children's fares of any proposal emanating from Brussels to put VAT on public transport? Will my hon. Friend make it clear beyond peradventure that the Government will veto any such suggestion?

Mr. Mitchell: I note my hon. Friend's views.

Bus Deregulation

Mr. Alton: asked the Secretary of State for Transport what studies his Department has conducted on the effects of bus deregulation on urban and rural transport in the north of England.

Mr. David Mitchell: Research being carried out by the Department's Transport and Road Research Laboratory into the effects of bus deregulation includes a number of studies in the north of England, including Merseyside.

Mr. Alton: Does the Minister remember his comments on Merseyside during the general election that deregulation had not been the success there that he had hoped for? Is he aware that 36 per cent. of fare-paying passengers have been lost from the Merseyside buses since deregulation and that fares have risen by almost 50 per cent.? Will he tell the House how Merseyside passenger transport executive can continue running services when

the guidelines that have been set by the Government are £36 million less than the sum that it estimates is needed for its requirements?

Mr. Mitchell: When I was on Merseyside, I said that as yet the benefits of deregulation had not become as apparent in Merseyside as I had hoped, and as I expect they will. It is true that fares on Merseyside had been kept artificially low for many years. The cost of transport service provision on Merseyside amounted to almost £50 per man, woman and child, and that huge and excessive amount is being trimmed hack. Last week I met representatives of the passenger transport authority in that area, and we are considering the comments that it made.

Mr. Holt: Would my hon. Friend care to note that in Cleveland, as a consequence of deregulation, the subsidy by the ratepayers has been reduced from £5·8 million per year to £1·8 million, a saving to the ratepayers of £4 million, without any effect on the services, except perhaps to improve them?

Mr. Mitchell: I am grateful to my hon. Friend. What he says is borne out by the interim report of the Transport and Road Research Laboratory, which confirms what Ministers have been saying — that deregulation is a success. Bus mileage has been broadly maintained, there have been no massive cuts in services as forecast, the number of operators is about the same, and competition is starting to introduce new and innovative forms of service such as minibuses in over 200 towns.

Mrs. Dunwoody: Is the Minister aware that some of those advances are very unfair to people in my constituency? In rural areas, many of the bus services are much worse, the fares are much higher and, above all, it is singularly unfair on those who work in the bus industry, who are being forced to renew their contracts by a one-sided abrogation by Crosville that will lower the terms, conditions and wages of the bus men?

Mr. Mitchell: Obviously, the latter matters are for the Crosville management, not for Ministers. Many rural services are loss-making. It is for the county or the PTE to decide whether they are socially necessary and for them to make the necessary provisions.

Mr. Tony Lloyd: As the widespread perception is that deregulation has caused a severe loss of quality in bus transport, especially in rural areas, and as passenger transport authorities do not believe a word that Ministers say, does the Minister agree that an independent survey should be published as soon as possible so that we can discover what is really happening?

Mr. Mitchell: I welcome the hon. Gentleman to his new position on the Opposition Front Bench and congratulate him on reaching that particular bed of nails.
As for an independent inquiry, the TRRL will provide such a report, which I believe will be very valuable.

Channel Tunnel

Ms. Quin: asked the Secretary of State for Transport how advanced the plans are for a direct rail link from Newcastle and the north-east of England to the Channel tunnel.

Mr. David Mitchell: British Rail is well aware of the commercial opportunities that the Channel tunnel will


bring to provide services from the continent to many parts of the country, including the north-east. It will be making detailed plans over the next two years.

Ms. Quin: I am disappointed at the Minister's reply. Will he give an assurance that on the day when the tunnel opens there will be a direct link to areas such as the northeast of England? Does he accept that if that is not the case, areas most in need of economic recovery will be further disadvantaged?

Mr. Mitchell: Clause 39 of the Channel Tunnel Bill requires British Rail, by the end of 1989, to produce a plan for the dispersal of passenger and freight traffic to various points in the country, subject to various commercial criteria. At present, planning is naturally at a very early stage and the pattern of services will depend on British Rail's assessment of demand.

Mr. Fallon: Will my hon. Friend confirm that the Government are investing £300 million in electrifying the east coast main line, one of the biggest infrastructure projects ever undertaken, for the benefit of the north-east? Is he further aware that industry in the north-east welcomes the Channel tunnel because it will provide a cheaper, faster freight transport link to European markets of a kind never before enjoyed?

Mr. Mitchell: Electrification of the east coast main line is the biggest investment by British Rail in 25 years, and it will bring substantial benefits to the north-east, as will the link with the Channel tunnel.

Mr. Snape: Does the Minister accept that the link is especially important for freight traffic and that it is vital that freight and inland Customs clearance depots be provided in the north-east in the short term so that rail-based traffic patterns can be established well before the tunnel opens in 1993?

Mr. Mitchell: I am expecting the director of British Rail Freight to give me some guidance this summer on the pattern of freight depots that he expects will be required. I shall take into account the point that the hon. Gentleman has made.

Heavy Traffic (London)

Mr. Chapman: asked the Secretary of State for Transport what assessment he has made of the trend in the volume of heavy vehicle movements in and around the metropolis following the completion of London's M25 orbital motorway.

Mr. Peter Bottomley: Surveys indicate that the effect of the M25 has been substantial. The number of heavy goods vehicles using London's roads has fallen by 20 per cent.

Mr. Chapman: I welcome that trend and consequence, which was a prime purpose of the London orbital motorway. Does my hon. Friend agree that the time is now propitious for the introduction of lorry action areas in at least part of the metropolis, banning heavy vehicle through traffic from inadequate roads when alternatives such as the M25 are available?

Mr. Tony Banks: The GLC lorry ban.

Mr. Bottomley: Some people who have brought their voices from the other side of the Thames seem to have forgotten that many local lorry action areas are not

controversial and are well supported. I should perhaps agree with what my hon. Friend the Member for Chipping Barnet (Mr. Chapman) said.

Mr. Tony Banks: In effect, the hon. Member for Chipping Barnet (Mr. Chapman) has asked for a GLC lorry ban. It is a great pity that the Minister, because of his ideological objections, has not seen fit to support that ban. What proposals do the Government have to increase the capacity of the M25, as it is clearly becoming one of the longest circular traffic jams that the country has ever seen?

Mr. Bottomley: Before ascending to the realms of fantasy, the hon. Gentleman might allow me to interpret the comments of my hon. Friend rather than doing it for me. The M25 is a circle on the map, but it is designed to be used for half its length or less. There will be a review to see what extra can be provided, but the changes already made at some junctions have helped to cope with some of the problems because half the traffic comes off at successive junctions.

Mr. Watts: When does my hon. Friend expect work to start on the widening of the M4 through my constituency——

Mr. Speaker: Order. The question relates to the M25.

Mr. Watts: Yes, Mr. Speaker—which I believe was envisaged in the roads White Paper to deal with the additional volume of traffic that is generated by the M25 in the area of Heathrow?

Mr. Bottomley: I am not sure whether to answer that question. Obviously, getting extra capacity where it is needed is important. I shall try to make sure that we continue to make announcements on the widening of the M4, and, for that matter, the M25 when we can. I expect that we shall continue to see improvements without covering the whole of the countryside with concrete.

Sir George Young: Is my hon. Friend aware that, despite the welcome completion of the M25, heavy vehicles —indeed, other vehicles—move with extreme difficulty on the north circular road through Ealing? When does he propose to come to a decision on the inspector's report, which has been with his Department for about two years?

Mr. Bottomley: Shortly.

Mr. Snape: Will the Minister now reconsider his reply to his hon. Friend?

Mr. Bottomley: I do not think that that would meet with my hon. Friend's approval.

Mr. Cash: Does my hon. Friend accept that much of the jamming that takes place on the M25 and other motorways is the result of the cone cloning that has developed over the past two years? A few weeks ago I wrote to my hon. Friend about the matter, in respect of which he said that he would let me have a reply, but I have not yet received it.

Mr. Bottomley: We try, when we can, to send cones off on holiday during bank holidays. On other occasions when work is going on, as my hon. Friend will have heard from my right hon. Friend in answer to question No. 1, we take road casualty reduction seriously. We do not want to see heavy traffic going past workmen. We often see cones because concrete is hardening. There is always some good purpose for cones being there.

Air Fares and Routes (Deregulation)

Mr. David Atkinson: asked the Secretary of State for Transport if he will make a statement on progress on the deregulation of European air fares and routes.

Mr. Channon: The Transport Council was unable to adopt a unanimously agreed package of air transport liberalisation measures, which Spain blocked rather than see Gibraltar included. The Government are now doing all that they can to find ways of saving the package, without compromising the legitimate rights of the people of Gibraltar.

Mr. Atkinson: I thank my right hon. Friend for his reply. Will he assure the House that the proposals that he and his European colleagues discussed last month in Luxembourg would have resulted in true competition and lower fares? Does he agree that the proposed merger between British Airways and British Caledonian only makes the matter even more urgent to resolve?

Mr. Channon: I had better not comment on the last part of my hon. Friend's question. On the first part of his question, I can assure him that what we discussed in the Transport Council would have widened the choice of fares on European services, would have widened the choice of services, would have introduced real competition to many major routes for the first time, and would have been much in the interests of British travellers. I hope that a way can be found to achieve that.

Mr. Colvin: My right hon. Friend must have a view on whether progress towards deregulation will be helped or hindered by the proposed merger between British Caledonian and British Airways. May we hear it?

Mr. Channon: I am sure that my hon. Friend knows perfectly well that the matter is being considered by the Director General of Fair Trading. He has to report to my right hon. Friend. In the circumstances, it would be quite wrong for me to make any comment.

Mr. Skinner: Is this the same Government who, several years ago. welcomed Freddie Laker and his enterprises?

Mr. Channon: As usual, the hon. Member has put an important point.

Mr. Steen: Does the Secretary of State agree that there is little point in having deregulation if there is no competition left in this country? Will he also agree, with his right hon. Friend the Secretary of State for Trade and Industry, to see the chairman of Virgin Atlantic, who is concerned about international routes, the chairman of Air Europe, who is concerned about European routes, and the chairman of British Midland Airways, who is concerned about domestic routes? Will he make sure that such a delegation is seen by him and the Secretary of State for Trade and Industry before any decision is made about the British Caledonian and British Airways merger?

Mr. Channon: All those people should, in the first instance, put their views to the Director General of Fair Trading. I have some experience as Secretary of State for Trade and Industry, and I know how these things operate. It is for the Director General to make a recommendation to the Secretary of State, who can then decide whether to accept or reject it. This question deals with the deregulation of European routes, and does not go nearly as wide as my hon. Friend's question.

Mr. Robert Hughes: The Minister must realise that there is a connection between deregulation. whether internationally or in Europe, and the merger between British Caledonian and British Airways. Would it not have been much better, since, as I understand it, he was advised of the talks early last week, to have had a thorough discussion with the two airlines and with the other operators in order to arrive at a sensible and rational solution to the issues, instead of the unseemly scramble that is going on to try to get routes from British Caledonian and British Airways? If the matter is to go to the Director General of Fair Trading, will the Minister advise the Secretary of State for Trade and Industry to make a reference quickly so that the matter can be resolved as early as possible in the interests of all those concerned in airline aviation?

Mr. Channon: I take note of what the hon. Gentleman has said, and I am sure that my right hon. Friend will consider the hon. Gentleman's representation. This question deals with the deregulation of European air fares and routes. The House might he interested to know that British Airways serves 52 European destinations from London. British Caledonian serves eight, and competes with British Airways on seven of them.

Local Authority Airports

Sir Fergus Montgomery: asked the Secretary of State for Transport what has been the total capital expenditure at local authority airports since 1979.

Mr. Channon: Since 1979, capital investment at local authority airports has totalled more than £260 million.

Sir Fergus Montgomery: How much did the Labour Government invest in local authority airports? How much of the £260 million was invested in Manchester airport?

Mr. Channon: The Labour Government invested about £16 million, as opposed to the £260 million invested under the Conservative Administration. Of the £260 million, £93 million was invested at Manchester alone.

Mr. Alton: Will the Secretary of State confirm that Liverpool airport, which is owned by the local authority, is having to meet repayment charges on revenue of about £2 million a year and debt charges of £2 million a year'? What additional assistance can be given to Liverpool airport? Where does it fit in his plan for regional airport policy, and what is being done to resolve the shareholding issue among the five district councils?

Mr. Channon: I want Liverpool airport to he run by a Companies Act company very soon. The passenger transport authority has so far failed to produce a scheme which transfers ownership of the shell company which it formed to the five Merseyside district councils. I am urgently considering what action to take in respect of the problems at Liverpool.

Mr. Ashby: Does my right hon. Friend agree that it is very necessary for those airports to continue their investment, and does he envisage that investment coming from the private sector? Will he ensure that the local authorities float their shares on the public market so that we can have wider share ownership and financing for the necessary investment from the private sector rather than the public sector?

Mr. Channon: It is a matter for the local authorities. They now have the advantage of powers to privatise their airports. It has not so far been suggested that there should be compulsory privatisation of local authority airports, but I have considerable sympathy with what my hon. Friend said about private sector investment.

Mr. John Evans: Will the Secretary of State give the House an undertaking that he does not intend to introduce legislation which would force the local authorities to relinquish control of Manchester airport?

Mr. Channon: That is not an issue at present. Manchester airport has received investment of £93 million since the Conservative Government came to office, so no one can doubt our desire that Manchester airport should flourish and be an outstanding success, which it is.

Mr. John Mark Taylor: If my right hon. Friend is interested in the welfare of east midlands airports, does he believe that it would be advantageous for the northern continuation of the M42 to be a motorway, not a dual carriageway?

Mr. Channon: That is a very ingenious question. I shall look at the matter urgently.

Mr. Tony Lloyd: Does the Secretary of State recognise that the £93 million worth of investment in Manchester airport was done by the local authority and had nothing to do with the Government? Will he answer the question posed by my hon. Friend the Member for St. Helens, North (Mr. Evans) and say categorically that the Government will not allow plans for the privatisation of Manchester and similar municipal airports?

Mr. Channon: I have no current plans to privatise compulsorily local airports. Indeed, I cannot understand why Opposition Members make such a fuss about it.

Uninsured Drivers

Mr. Nicholas Baker: asked the Secretary of State for Transport what action he will take to reduce the number of uninsured drivers on roads in the United Kingdom.

Mr. Peter Bottomley: Driving without insurance is illegal. Reducing uninsured driving involves vehicle owners and drivers, insurers, enforcement authorities and the Government. The road traffic law review is considering possible changes to penalties, including those for insurance offences.

Mr. Baker: Is my hon. Friend aware of estimates suggesting that there are no fewer than 1 million uninsured drivers on the roads? Is he also aware that the insured drivers cough up and have to pay about £30 million a year towards the cost of meeting claims in respect of those uninsured drivers? Is it not time to consider a scheme whereby drivers are required to display on their vehicles some sort of disc to show that they have insurance cover?

Mr. Bottomley: The difficulty is that our insurance system varies from those of other countries that have such a system. Our insurance policies can contain exclusion clauses so that the vehicle may be covered for one driver, but not for others. The insurance would need to be vehicle-specific. Perhaps I can write to my hon. Friend giving details of some of the inhibitions.

Roads Programme

Mr. William Powell: asked the Secretary of State for Transport what additions have been made to the roads programme in the last 12 months.

Mr. Peter Bottomley: Since 1 July 1986, 86 schemes have been added to the trunk road construction programme. Details are given in the roads policy White Paper, Cm. 125, published on 28 April 1987.

Mr. Powell: Is my hon. Friend aware of how welcome the improvements and additions have been in the county of Northamptonshire, especially in the eastern part of the county, and not least the A1-M1 link the construction of which will begin shortly? Will my hon. Friend accept that the huge industrial and commercial success of the town of Corby is making it necessary for the roads in the Stamford and Peterborough areas to be considerably improved so that the carriageway to parts of Boston and King's Lynn, and further across Norfolk, can be made a great deal easier than is currently the case?

Mr. Bottomley: I cannot give a detailed answer to the second part of my hon. Friend's question. However, on the first part, it is true that better roads help economic development as well as road safety and the improvement of the environment. The Government intend to continue to manage the economy so that we can continue to have gradual improvements to the road network.

Mr. Haynes: The Minister knows full well that the Government are providing money for the extension of the road surface programme. However, when will the Minister have a word with the Secretary of State so that he will ask at Cabinet meetings for the provision of money for resurfacing roads when that is required? The roads in my constituency are full of potholes. The Secretary of State should be ashamed of himself. He should open his mouth in Cabinet meetings so that we can have such holes filled in.

Mr. Bottomley: My right hon. Friend is responsible for about 4 per cent. of the road network. The other 96 per cent. is the responsibility of the local authorities——

Mr. Haynes: The Government have cut the rate support grant.

Mr. Bottomley: Perhaps the hon. Gentleman will allow me to finish. The amount of money that has been spent on road maintenance has increased under the Government in roughly inverse proportion to the amount that was cut by the Labour Government. I hope that we shall receive the hon. Gentleman's support for what we are doing and for our continuation in office.

Mr. Boswell: While accepting that the A1-M1 link is now to he a fact, will my hon. Friend give us the firmest possible assurance that he will treat the problems of the intervening villages along the access roads with the greatest possible sensitivity, because there is great concern?

Mr. Bottomley: On both the national roads and in our dealings with local authorities about local highways we try to make sure that the greatest advantage is taken from improved roads such as the A1-M1 link.

Mr. Hood: Is the Minister aware that the most dangerous stretch of roadway in Britain is the A74, which is connected to the M74 in Scotland, 32 miles of which go


through my constituency? Is he also aware that the Conservative manifesto for Scotland pledged to upgrade the A74 to the M74? People are still being killed on that roadway and as recently as last week a family of three were wiped out. Will the Government carry out their commitment to upgrade that roadway to motorway category as soon as possible, because we are now told that it might take 10 years. That is not acceptable. The Government must complete that roadway to save people's lives.

Mr. Bottomley: I fully understand why the hon. Gentleman makes those points, but they would be more appropriately made to my hon. Friend the Minister responsible for roads in Scotland. The hon. Gentleman emphasised the point that, with more than 5,000 people killed on our roads a year, many lives may be saved by having roads built to the appropriate standard, whether low-cost, high-return engineering work, motorways or something in the spectrum in between. I shall continue to do what I can, as will my colleague in the Scottish Office.

Routes and Road Improvement

Mr. Squire: asked the Secretary of State for Transport whether he will review the scope for reducing delays in the procedure for determining routes for road improvements; and if he will make a statement.

Mr. Bottomley: All pre-construction procedures are kept under continuous review with the aim of minimising the time taken and improving efficiency.

Mr. Squire: I thank my hon. Friend for that answer. As he is aware, in the time since I tabled the question my hon. Friend has announced after 13 years the re-routing long sought by my constituents in Rainham, for which I am grateful, as are they. Nevertheless, will he consider, on reflection, that 13 years is rather a long time to await such a decision for which we pressed in 1975?

Mr. Bottomley: Yes, Sir.

Oral Answers to Questions — ATTORNEY-GENERAL

State Security

Mr. Dalyell: asked the Attorney-General if he will request the Director of Public Prosecutions to reach a decision on prosecution by 24 July in the case involving the search of BBC premises in Glasgow in relation to the Zircon satelite project.

The Attorney-General (Sir Patrick Mayhew): The Director will reach his decision, if necessary in consultation with me, when all the relevant police inquiries have been completed and the evidence obtained has been carefully considered.

Mr. Dalyell: When will the Zircon material currently in the possession of the police be returned to the BBC?

The Attorney-General: That is a matter for the police on which I am not qualified to reply today.

Mr. Hayes: Does my right hon. and learned Friend agree that if the police had not searched the BBC premises they would have been accused of incompetence and endangering national security?

The Attorney-General: Critics of the police, to say nothing of the Law Officers, do not lack versatility.

Mr. Galloway: This invasion of BBC Scotland took place in my constituency and one of the makers of the Zircon film, Mr. Brian Barr — a film maker of distinction—is one of my constituents. Is the Attorney-General aware of the deep sense of violation which is still felt in BBC Scotland about this raid and the unjustified cloud of anxiety about prosecution that still hangs over my constituent and his family? When will this sinister farce be brought to an end and the book on this matter closed?

The Attorney-General: Responsibility for a possible prosecution rests with me, as I superintend the Director of Public Prosecutions. I repeat the answer that I gave, which is that the Director of Public Prosecutions will reach his decision, if necessary in consultation with me, when all the relevant police inquiries have been completed and the evidence obtained has been carefully considered.

Mr. Nicholas Bennett: Is my right hon. and learned Friend aware that many Conservative Members are delighted that the police raided the BBC and that we accept that the BBC is not above the law on matters of national security?

The Attorney-General: The Director of Public Prosecutions makes any request to the police for investigations, regardless of any partisan considerations. He acts impartially, as do the police, in all circumstances.

Mr. John Morris: When will the decision be taken?

The Attorney-General: I hesitate to give the same answer three times in one Question Time, hut, as I have said, the decision will be taken when all the evidence has been fully considered. I intend next to meet the Director of Public Prosecutions on this matter later this week.

Mr. Dalyell: In view of that unsatisfactory reply. I beg to give notice that I shall seek to raise the matter on the Adjournment.

Police and Criminal Evidence Act 1984

Mr. John Mark Taylor: asked the Attorney-General if he will make a statement on progress on the working of the Police and Criminal Evidence Act provisions for overnight prisoners in police stations and their access to legal advice.

The Solicitor-General (Sir Nicholas Lyell): Arrangements are now well established to enable prisoners in police stations to have access to free legal advice, day or night. Cases before 88 per cent. of all magistrates' courts and 94 per cent. of busy courts now originate in police stations covered by a duty solicitor service. The Law Society continues to encourage improved coverage at local level.

Mr. Taylor: Will my hon. and learned Friend take note of the fact that the overnight duty solicitor scheme, far from providing advice and assistance to suspects whose civil liberties might be at risk, is being exploited by old lags who could perfectly well wait until 9 o'clock in the morning? Surely that is not the intention of the scheme and is not good for the morale of that scheme.

The Solicitor-General: The Police and Criminal Evidence Act 1984 constitutes a balance between proper and effective powers for the police, which may get the old lag into the police station, and a safeguard of the rights


and liberties of the subject. The right of access to legal advice is an important safeguard. We believe that that balance is working well.

Mr. Fraser: Will the Solicitor-General discourage the police from the practice of taking incriminating statements oral or written first, and then allowing the prisoner access to legal advice?

The Solicitor-General: I warmly welcome the hon. Gentleman to his new post. The Police and Criminal Evidence Act 1984 and the code of practice are perfectly clear as to the right to legal advice, and they should be followed.

Mr. Hind: Will my hon. and learned Friend consider a review of the procedures of the Police and Criminal Evidence Act relating to the detention of prisoners at a police station and the interviews in the light of the fact that so many hours are being spent by police officers on those statements? That task is reducing the effectiveness of policing on the streets and is causing widespread worry among the police force and the public.

The Solicitor-General: I note carefully what my hon. Friend has said. Our evidence is that the Police and Criminal Evidence Act is, on the whole, working well. However, I shall take my hon. Friend's remarks into account.

Official Secrets Act

Mr. Campbell-Savours: asked the Attorney-General how many prosecutions under the Official Secrets Acts he has instituted in 1987.

The Attorney-General: Since becoming Attorney-General I have not consented to any such prosecution.

Mr. Campbell-Savours: If Wright's allegations have damaged the security service, which was part of Sir Robert Armstrong's case in the Australian courts, why have no prosecutions under section 2 of the Official Secrets Act been brought against The Observer, The Guardian, the Sunday Telegraph, The Sunday Times, the Daily Mirror, the London Daily News and The London Evening Standard? Could the answer be that the Attorney-General knows that when he brings proceedings for criminal contempt and injunctions there are no juries to adjudicate and examine those matters, whereas if he brings the case under the Official Secrets Act there will be a jury and he knows well that the courts and the juries would simply reject his whole case?

The Attorney-General: The hon. Gentleman is very ingenious at constructing any number of potential reasons for the exercise of the discretion of the Law Officers. These are matters for discretion and, at present, I take responsibility for them.

Mr. Aitken: Given the tidal wave of legal actions that are now going on around the world on such issues as what is and is not an official secret, or what the press may or may not publish, does it not worry my right hon. and learned Friend that these issues are being resolved and new law being made ostensibly by the judges while Parliament declines to reform the now discredited Official Secrets Act? Surely it is time for Parliament to make the rules and draw the lines in clear places.

The Attorney-General: My hon. Friend is aware that responsibility for any reform of the Official Secrets Act lies

with my hon. Friend the Home Secretary. Equally, he knows that the predecessor Conservative Government attempted that reform, but it did not find favour in the House of Lords. Meanwhile, the Attorney-General, as first Law Officer of the Crown, has a duty to ensure that the due administration of justice is not interfered with. The Government, collectively, have the responsibility to take such steps as seem appropriate to protect the duty of confidentiality owed by former members of the secret service.

Mr. Beith: When are the Government going to cut their losses on the Peter Wright case and recognise that the amount of material already available and the significance of the issues raised totally outweigh the Government's capacity, now virtually non-existent, to strengthen the issue of confidentiality by further legal proceedings?

The Attorney-General: I am criticised for losing in the courts—as I was by the right hon. and learned Member for Aberavon (Mr. Morris) on "Newsnight" last Tuesday —and I am criticised for winning, as I did in the Court of Appeal on Wednesday. I do not believe that the hon. Gentleman's question can be answered until we see whether, and if so to what extent, the Government have lost.

Mr. Favell: Is my right hon. and learned Friend aware that Mr. Peter Wright is regarded by many people in this country as a squalid little man who has betrayed his oath and now will betray his country, and that others should be deterred from doing exactly the same thing?

The Attorney-General: I must hold to the practice of myself and my immediate predecessor of not commenting on matters that remain in issue in the Australian proceedings.

Mr. John Morris: While I would expect the Attorney-General to say that the Prime Minister has no hand in prosecutions under the Official Secrets Act, can he give the same assurance regarding the inference that, had the Court of Appeal ruled against the Government last week the Prime Minister would have instructed him to obtain an injunction against The Sunday Times, and the further inference that could be drawn from the Treasury solicitor's call to Theodore Goddard, The Sunday Times solicitor? Do the inferences that the Prime Minister was involved have no basis?

The Attorney-General: I can answer that question clearly by referring the right hon. and learned Gentleman to the written answer given to him on 8 December last year by my immediate predecessor. In matters that relate to proceedings of a criminal nature, which embraces criminal contempt, proceedings and the question whether to take them are entirely a matter for the Attorney-General. The proceedings that I took on Sunday last and Thursday last week fell into that category. They were taken by me without reference to the Prime Minister or any other Minister. Civil proceedings to protect by injunction the duty of confidentiality, to which I referred this afternoon, are a matter for the Government collectively. The Prime Minister, other Ministers and myself properly have a say in those matters.

Oral Answers to Questions — OVERSEAS DEVELOPMENT

Aid-Trade Provision

Mr. Holland: asked the Secretary of State for Foreign and Commonwealth Affairs what measures he is taking to ensure that overseas aid spending through the aid-trade provision serves the development needs of the overseas countries concerned; and what share of official development assistance has been absorbed by the aid-trade provision in the latest available 12-month period, relative to 1979–80.

The Minister for Overseas Development (Mr. Chris Patten): Our appraisal procedures are designed to ensure that ATP projects represent a sound investment for the recipient country. In 1979–80, expenditure on ATP was approximately £29 million, or about 3·5 per cent. of the total gross aid programme. In 1986–87, expenditure on ATP was approximately £81·3 million, or about 65 per cent.—I meant to say, 6·5 per cent.—of the total gross aid programme.

Mr. Holland: We hope that the ATP will not rise to 65 per cent. of the aid programme. However, it is clear that the long-term trend under the Government is that it has risen, is rising and is likely to rise still further. I commiserate with the Minister, granted the attack by the Minister for Trade on the development criteria for ATP, as reported in Wednesday's edition of the Financial Times. He should be concerned to ensure that development context of ATP provision. If he does, I am sure that he will have the support of both sides of the House and of my hon. Friend the Member for Eccles (Miss Lestor), whom we welcome to the Front Bench.

Mr. Patten: I wish the hon. Gentleman well, although not too well, in his new responsibilities. I read the characteristically supportive speech by my hon. Friend the Minister for Trade, to which the hon. Gentleman drew attention. As I said at our previous Question Time, we shall respond to the report of the Select Committee on Foreign Affairs in due course. I know that the Department of Trade and Industry will make a valuable contribution to the Government's response to that report.

Mr. Raison: Does my hon. Friend agree that it is much better that decisions about the allocation of ATP money should be made by him, with proper regard to developmental considerations, than by my hon. Friend the Minister for Trade?

Mr. Patten: I note my right hon. Friend's remarks. As I said, we shall respond to the FAC report in due course, but I should not want in any way to criticise my hon. Friend the Minister for Trade.

Refugees (UN Aid)

Mr. Mullin: asked the Secretary of State for Foreign and Commonwealth Affairs what action he proposes to take in the light of of the recent Oxfam paper on the use of United Nations aid to refugees on the Thai-Kampuchean border, a copy of which has been sent to him.

Mr. Chris Patten: The refugees on the Thai-Cambodian border, who are there as a result of Vietnamese military operations in Cambodia, have no means of support other

than the international humanitarian assistance provided by donor countries such as Britain. Most of that assistance is channelled through United Nations agencies. We shall continue our contribution to the international relief effort for the refugees and our political support for efforts aimed at securing a peaceful solution to the problem.

Mr. Mullin: Does the Minister not consider it shameful that British taxpayers' money is supporting what is in effect a front organisation for the Khmer Rouge and Pol Pot?

Mr. Patten: No, because it is not.

Mr. Alton: Is the Minister aware that the Jesuit Refugee Service estimates that there are now about 386,000 displaced persons in Thailand, 54,000 of whom are Kampucheans? Can he say that the Government will not take into account political considerations when determin-ing what aid to give those people who are living in squalid conditions in refugee camps? What help are the Government giving to ensure that a political initiative is taken whereby Vietnamese troops will be withdrawn from Kampuchea?

Mr. Patten: We have provided £13 million through United Nations agencies and international relief organisa-tions for refugee programmes in the area. I agree with what the hon. Gentleman said about the importance of continuing to give that humanitarian assistance. We are also prepared to consider humanitarian assistance projects within Cambodia, but we are not prepared to consider support for developmental projects in Cambodia that would support the Government there and the occupying forces of Vietnam.

UN Children's Fund

Mr. Tom Clarke: asked the Secretary of State for Foreign and Commonwealth Affairs what is his policy towards the United Nations children's fund's proposals entitled "Adjustment with a Human Face"; and if Her Majesty's Government will promote these policies at the forthcoming annual meeting of the International Monetary Fund and the World Bank.

Mr. Chris Patten: We share the concern of the United Nations children's fund for the welfare of the poorest people when developing countries are carrying out structural adjustment. At the annual meeting of the IMF and World Bank we shall continue to encourage Governments to take steps which will protect the poorest vulnerable groups during adjustment. But without adjustment, continuing economic decline would deepen poverty for many poor people.

Mr. Clarke: Is the Minister aware that hon. Members will welcome the Chancellor's spoken initiatives on African debt, based as they no doubt are on Judith Hart's negotiating achievements? Does he accept that there is a crying need for the Chancellor to press hard on the call for a more equitable approach to structural adjustment, and that he will be given a brilliant opportunity to do that at the important meetings in Washington?

Mr. Patten: I hope that we shall be able to follow up what was said at the spring and the autumn meetings of the fund and the bank, to which the hon. Gentleman referred. He is quite right to draw attention to the


important initiative that my right hon. Friend has taken on African debt. I very much hope that that initiative will receive the support that it deserves from other countries.

Developing Countries (Aid)

Miss Lestor: asked the Secretary of State for Foreign and Commonwealth Affairs when he will next be meeting Ministers at the development assistance committee of the Organisation for Economic Co-operation and Development to review aid flows to developing countries.

Mr. Chris Patten: I expect to attend this year's high level meeting of the development assistance committee in early December.

Miss Lestor: Does the Minister agree that the people of this country have responded incredibly well to all the efforts that have been made to combat some of the terrible tragedies that have occurred in the Third world? Does he not therefore think it a good idea, when he attends the discussions, to set a target of reaching 0·7 per cent. of gross national product as aid in order to encourage these people? Repeatedly, we see reports of the declining level of our aid, which must bring no comfort to the Third world and even less to the people of this country, who have responded so well to the appeals that have been made.

Mr. Patten: May I begin by welcoming the hon. Lady to her new responsibilities. I know that she is highly knowledgeable about the subject on which she will be speaking.
I agree with the hon. Lady about the response of the public to appeals for assistance for other countries. I am also pleased that at the last development assistance committee review of British aid, the DAC complimented the continued high concessionality of the British aid programme, the large share of our resources that is devoted to multilateral programmes and the relatively large proportion of our aid budget that goes to the poorest countries, compared to the OECD average. We have a quality aid programme, and I am pleased to be responsible for it.

Mr. Latham: When my hon. Friend next meets his fellow Ministers will he discuss with them what can be done to help Zambia, so as to persuade it to stop blocking funds due to be repatriated to this country to constituents of hon. Members, such as one of mine, who is currently on supplementary benefit?

Mr. Patten: I note what my hon. Friend has said. I have taken up the issue of remittances with a number of Governments in sub-Saharan Africa and will do so again when I have the opportunity.

Aid Statistics

Ms. Ruddock: asked the Secretary of State for Foreign and Commonwealth Affairs what information he has as to the combined average percentage of gross national product given to developing countries as official aid by Belgium, France, Holland, Italy and West Germany.

Mr. Chris Patten: Total net official development assistance provided by Belgium, France, Holland. Italy and West Germany, as a proportion of their combined GNP, is estimated to have been 0·55 per cent. in 1986.

Ms. Ruddock: Does the Minister accept that that percentage is considerably in excess of what Britain is making available? Does he realise that, notwithstanding his earlier answer about the quality of our aid, quantity is clearly important? What steps will be take to ensure that Britain's aid to the poorest countries is increased to a higher proportion of our GNP, and when will it reach the United Nations recommended level of 0·7 per cent. of GNP?

Mr. Patten: Our position is exactly the same as that of all previous Governments, who have not been able to give a timetable for achieving the target. The hon. Lady mentioned the proportion of our aid budget going to the poorest countries and I am sure that she will have noted what I said to the hon. Member for Eccles (Miss Lestor).

Mr. Forth: Does my hon. Friend agree that aid given voluntarily by individuals is intrinsically of much more value than taxes levied on an unwilling population and distributed according to an arbitrary figure decided by outside sources? Will he encourage individual giving to charities of people's choice as the best means of helping the Third world?

Mr. Patten: I believe that individual giving and contributions by the taxpayer can make an important contribution to the development of countries that are less advantaged than our own.

African Agriculture

Sir Russell Johnston: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on his Department's aid to African agriculture.

Mr. Chris Patten: Preliminary estimates indicate that some 30 per cent. of our bilateral aid programme for Africa in 1986 was spent on agriculture and related activities, and that total British aid expenditure on these activities last year, through both bilateral and multilateral channels taken together, amounted to about £140 million.

Sir Russell Johnston: Nevertheless, does the Minister agree that small-scale agricultural development is vital in establishing self-sufficiency in food in African countries and that in 1984 only 15 per cent. of our bilateral aid was allocated to agriculture and related economic developments, compared with about 55 per cent. that was devoted to energy developments?

Mr. Patten: I am not sure that I can agree with the hon. Gentleman's figures. About 30 per cent. of our bilateral programme goes to agriculture and related projects in Africa. I agree with him about the importance of supporting small-scale agriculture, and agriculture generally. That is why we made a contribution to the International Fund for Agricultural Development's special programme for Africa. That was one of the motivations in our successful efforts to reform the European Community's food aid policy.

Mr. Peter Wright (Memoirs)

Mr. Tam Dalyell: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the Prime Minister's recent role in the Peter Wright case.
I have to persuade you, Mr. Speaker, that the matter is definite, important and urgent. It is definite, because news has come into the public domain that shortly before 3 pm on Wednesday 8 July the Treasury Solicitor's office contacted Theodore Goddard, solicitors, informing them:
The Prime Minister is tied up for the next hour or so. But as soon as she comes free. I anticipate being told to ask you for an undertaking not to publish any further extracts from Wright's book.
At about 4 pm on the same day, the Treasury Solicitor's office called Theodore Goddard and demanded just such an undertaking by 5.30 that afternoon.
I have to persuade you, Mr. Speaker, that the matter is important. It would appear to be an example of the Prime Minister stepping into what Parliament has always believed to be the sphere of decision-making of a Law Officer, as a Law Officer. Is it not clear that, in the absence of a subsequent decision by the Appeal Court, the Attorney-General would have been in the position of having been instructed by the Prime Minister to seek an injunction? Of course, we cannot know what the Attorney-General's reaction would have been.
I also have to persuade you, Mr. Speaker, that the matter should have urgent consideration. Surely any prima facie case of the blatant abuse of a Law Officer's responsibilities as a Law Officer by a Prime Minister or any other Minister ought to be a matter of urgency for the House. During questions you will have perceived, Mr.

Speaker, that when the straight question was very properly asked from the Opposition Front Bench by my right hon. and learned Friend the Member for Aberavon (Mr. Morris) no answer was forthcoming other than a reference to a parliamentary reply on 8 December. Thanks to the Library, I have in my hand just two of the replies and there may be a third. Certainly, one of them has nothing to do with the Prime Minister. Ministers get into the habit of making references to previous replies that do not answer the question that was asked. On this occasion the question stated:
Mr. John Morris asked the Prime Minister what arc the current instructions to Departments as to the need to consult the Attorney-General when questions of public interest arise; and if there has been any change since the present Government took office.
The Prime Minister replied:
Appropriate steps will continue to be taken to see that Departments are aware of the Attorney-General's responsibilities and functions." — [Official Report, 8 December 1986; Vol. 107, c. 4–5.]
In this case, that clearly has not happened.
The behaviour of a Prime Minister in her public capacity is a matter of lasting importance for Members of the House of Commons, and it is on that basis that I believe that you ought to consider giving this matter precedence.

Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the Prime Minister's recent role in the Peter Wright case.
I have listened with great care to what the hon. Gentleman has said, but I regret that I do not consider the matter that he has raised to be appropriate for discussion under Standing Order No. 20, and I cannot, therefore, submit his application to the House.

Orders of the Day — Finance Bill

As amended, considered.

New Clause 1

TRANSFER PAYMENTS AND PRESERVED BENEFITS

`(1) It shall be permissible for the trustees of a pension scheme which is an exempt approved scheme under section 21 of the Finance Act 1970, to amend the rules of the scheme in regard to the calculation of transfer payments and of preserved benefits on behalf of any member ending pensionable service before the normal age of retirement under the scheme in accordance with the provisions of this section.

(2) For the purposes of this section "trustees", in relation to a scheme which is not set up or established under a trust means the managers or administrators of the scheme.

(3) To comply with the provisions of this section, the amended rules of the scheme shall require the trustees in respect of any member withdrawing from pensionable service before the normal age of retirement under the rules of the scheme at the withdrawing members' option either—

(a) to pay to an approved scheme a transfer payment in respect of the withdrawing members' entitlement of the sum that would be required by the withdrawing member's scheme for the purpose of admitting a new member of the same age, sex and pensionable remuneration as the withdrawing member in order to credit him with the same number of years pensionable service as the withdrawing member, (but subject to modification in accordance with (4) below), or
(b) to award preserved benefits to the withdrawing member of the same actuarial value as that sum.

(4) In a case where an actuary certifies that on the date of the certificate the scheme is not fully funded, (which is to say that the scheme does not have sufficient assets to meet its liabilities in respect of the whole or any specified part of the accrued rights to benefit of its members), the transfer payment, or as the case may be, the part of the transfer payment which corresponds with that specified part of those accrued rights, may be reduced by the percentage by which the scheme is so shown to be deficient.

(5) A scheme which after 1st January 1988 does not have rules so that the transfer payments and the preserved benefits payable under the scheme are to be calculated on terms at least as favourable to the beneficiaries as those specified in this section shall not qualify as an exempt approved scheme in respect of liabilities incurred after that date except by the permission of the Occupational Pensions Board.

(6) The trustees of an exempt approved scheme may apply to the Occupational Pensions Board for deferment of the latest date for the amendment of its rules in accordance with this section and to retain its status as an exempt approved scheme in respect of its liabilities incurred after that date to a date not later than 1st January 1989.

(7) The Secretary of State for Health and Social Security shall lay before Parliament regulations under this section subject to affirmative resolution of the House of Commons which shall specify the grounds on which the Occupational Pensions Board may approve applications for deferment under subsection (6) above.'. — [Sir Brandon Rhys Williams.]

Brought up, and read the First time.

Sir Brandon Rhys Williams: I beg to move, That the clause be read a Second time. I am very glad to express my thanks to you, Mr. Speaker, for selecting for debate this afternoon my new clause 1. Perhaps I could explain my reasons for being especially grateful. They are that, in Committee, I embarked on a

somewhat similar proposal and had the opportunity to express preliminary thoughts on the question of transfer payments in occupational pension schemes. As I pointed out in the course of the speech that I made in Committee, I was attempting to discuss the rules for dealing with early leavers who changed their jobs in relation to the new type of pension scheme that is introduced by this Bill. I took care not to expand too much on the ways in which I though we should deal with the transfer payments of people who are in the more conventional and longstanding occupational pension schemes.
We have had private sector occupational pension schemes funded by employers certainly since the 1920s. After the war, the movement expanded considerably. I think that the numbers involved in occupational pension schemes in the private sector probably reached their peak of somewhat more than 12 million employees during the 1960s. Since then, the expansion in the numbers of people in occupational pension schemes in the private sector has been rather disappointing. I think that the tendency, if anything, has been somewhat downwards. The value of the assets of people in the private sector schemes has enormously increased, however, not just because of inflation but because employers have steadily improved the quality of these schemes. Therefore, with the passage of years the stake of an employee who leaves his job early has grown enormously in real value.
Without wishing to speak too long on this subject, I should like to say why I think that first-class employers, who set up schemes which they intended to be excellent pension schemes, have fallen into the error of producing rules for their pension fund trustees that are extremely unfortunate for early leavers. These rules are working against the best interests of industry and business, because, by confining people in jobs where they are not particularly happy or where they do not feel that they are achieving as much as they could, rather than giving them all the freedom possible to better themselves by taking other employment and participating in other pension funds, the schemes have had a restrictive effect. Undoubtedly, many people today are working out their time in the service of an employer where they are not earning as much as they could or contributing as much as they should because they have found on making the calculation that the loss of their pension rights is so serious that they would be better to carry on doing a dull job that does not fully stretch them rather than to take the leap into a new firm, with all the risks that go with taking a new job, and certainly forfeit a large part of their pension rights.
A number of years ago I calculated that by the time an employee who is in the sort of job where he would expect to have a regular increment in his salary, as he progresses in the firm, and reaches middle life, the value of his assets in his pension fund is likely to be at least as great as the value of his house. If we imagine the reaction of an employee who was asked to write off the value of his house in changing his job, we then realise that we are anchoring potential mobile senior executives in pension funds and ensuring that they are not able to extricate their real asset.
The schemes have grown up wth this unfortunate built-in feature because in the 1920s and subsequently it was thought progressive and ideal to copy the features of the public sector pension schemes which were set up in the 19th century. I believe that this was a mistake, although one might say that the Civil Service scheme of the 19th century was an extremely handsome benefit. I do not think


that it was appropriate in the private sector, however, and although I do not want to dwell on this for too long, I think that it is a good thing to realise why we have the problem that we have, which the new clause is attempting to overcome.
The Government schemes that were set up in Victorian times were unfunded schemes. The taxpayer took on the obligation of meeting Civil Service pensions as and when they became payable, and did not put money aside in a real sense to accumulate on behalf of the beneficiaries. The taxpayer simply accepted a rising obligation, and when the officials concerned retired, the taxpayer met that obligation out of current revenue. There was no way in the public sector schemes of identifying a real personal asset belonging to any individual employee. That was not the way in which those schemes operated.
There was a disadvantage with such schemes, because they did not add anything to real saving by the community and equally did not produce a class of people, or a tradition, directed to managing pension funds in the same way as occupational pension schemes, which rely on a real asset accumulating and increasing year by year as the liabilities of the scheme increased. That has obviously had to happen in the private sector.
We did not come to private sector schemes with a ready-made theory about the way in which funds should be managed and the individual assets of individual employees could be identified. The public sector scheme just did not lend itself to that type of thinking. When it comes to argument about the valuation of the rights of early leavers in private sector schemes, we have no tradition to build on when determining the way in which these things should he dealt with in the private sector.
The other big mistake, as it seems to me, from the start in the public sector schemes was that they were final salary schemes. This, of course, was intended to be generous. Somebody who rises to considerable seniority in the public sector becomes accustomed to a high income, and to fall on retirement to a much lower standard of living would be harsh and unsuitable. The idea that the pension scheme gives continuity in retirement—at any rate, something like a half or two thirds of final pay—was seen to be a humane and reasonable aspect of personnel management in the public sector.
A final salary scheme which is unfunded can be as generous as it pleases to the high risers—or the people who end up on very substantial salaries. Attention is not drawn to the fact that a final salary scheme is a money transfer scheme if it in fact relies on a fund. If a real fund has accumulated for all the beneficiaries in common and there is a final salary handout, that fund is given preferentially to the people who have risen to the top, to the disadvantage of the people who have remained on relatively humble salaries.
There is an undesirable money transfer going on in the private sector final salary schemes which people do not entirely detect. However, it tends to make the calculation of each individual's entitlement at any one time difficult, because it rests on a fund held in common. It is not like a bank account, where everybody who has money in the bank has an identifiable asset. It is a common fund where assets are constantly sliding from one person to another according to his rate of promotion within the type of employment covered by the scheme.
Another anomaly in the final salary scheme is that young people tend to put contributions in and those

contributions are used to pay the pensions of older people in retirement, so there is a money transfer going on from young to old people as well. That also makes valuation difficult for people who might be regarded as oddities—people who do not stay until the normal age of retirement in the scheme but choose to make other plans for themselves in middle life.
The non-contributory character of public sector schemes has been imitated in private sector schemes. Here again, we see an origin in thoroughly muddled thinking. as I tried to point out in Committee, the non-contributory schemes in the private sector are not genuinely such. It is a commonplace in personnel management that a noncontributory pension scheme is reflected in the salaries or wages paid to its members. If one has a handsome pension on its way, to which one is not apparently contributing, one can reasonably expect to have somewhat lower remuneration than someone in comparable employment with an employer who requires him to make contributions which come out of his gross earnings.
In public sector schemes, it is hard to identify any part of the fund as belonging to any individual person —particularly the early leaver. But some 12 million people are now in private sector funded schemes. I am reliably informed that the total liabilities of the private sector funded schemes—I am not including the obligations of the taxpayer to public servants—have now reached over £200,000 million. If the true figure is anything like that, the House will agree that we are talking about very substantial sums belonging to the 12 million people who are building up claims on these funds. Therefore, for an employee to lose his rights or forfeit part of his rights, even in a move of job which appears to be good in his immediate circumstances—can be an extremely serious or even a financially disastrous matter in the long run.
It may also help the House if I explain some of the reasons why over the years, with the topic of the transferability of pension rights constantly under discussion, inadequate progress has been made. There are good reasons and bad reasons for that. I am interested in the first instance in what I regard as a bad reason.
When employers brought these schemes in before the war, and also after it, they saw them as an aspect of personnel management which was a generous but unnecessary gesture for the benefit of their employees. In providing a private sector pension fund, they were putting money, which might have gone back into the business or the shareholders, in the pockets of employees on top of their wages and salaries. It was regarded as a bounty to the employees, something for which they should be grateful but which did not give them much of an opportunity to chisel over the rights that they might have acquired under the schemes. It was a kind of gift.
Therefore, employers felt that there was no obligation on them to allow an early leaver to take an asset out of the fund, because the fund was seen as the employer's money, even if it had been put into the hands of trustees. A good employer simply thought that, if a person changed his plan and did not stay in the employer's service until the normal retirement age, he could have his own contributions, if any, possibly with interest, which might not be very generous — and the employer would deduct what he thought was appropriate in respect of any administrative costs.
Until 10 years ago, or less, early leavers were paid perhaps only a few hundred pounds when they left


employment, even after 10 or 20 years service. The sum was made even smaller by the fact that inflation had changed the whole aspectof the matter, because, when they made their contributions in the 1940s and 1950s, they put good money in but, when they drew it out, they got bad money back. With depreciation in the meantime, employers tended to use purely arithmetical calculations and not to uprate the amount of the employee's contributions to take account of the change in the value of money.
There was another bad reason why employers have resisted the idea of paying adequate transfer values. Employers tended to regard the pension schemes, particularly for their more senior workers, as fidelity guarantees. Employers particularly chose to make them final salary schemes to hold people whom they regarded as key employees—people whom they did not want to leave their service to work for someone else, possibly taking much of the firm's know-how with them and putting it in the service of a competitor. Employers frowned on the idea of people claiming a transfer value because they thought that, by leaving, the employee was doing something undesirable or disgraceful and that there was no reason why an employer should lean on the trustees of the sponsored pension fund to pay a huge cheque to someone who was making a move which the employer thought undesirable and not in the employer's interest.
One found that bodies such as the CBI, I am sorry to say, took a blinkered approach in the course of the campaign for the transfer of pension rights, thinking of pension schemes as a form of fidelity bond, and not realising that many of the CBI's members were looking for employees in middle life whom they needed to attract into their businesses. They were not able to recruit those people, because they were anchored by their pension funds with their first employer and were not able to make the jump into employment with a new firm.
The employers who wanted to hold on to their staff won the day and those who were actively looking for new staff were not able to influence the CBI's policy which, as I know from my own campaign on the transferability of pension rights, was decidedly hostile in the early years. I do not think that I need remind hon. Members that I have been campaigning on this subject for some 19 years, so I can look over a fairly long span of time in relation, to the campaign for transferability.
There is also a good reason why transferability is taking so long and why we still have not reached it. Valuation presents a genuine problem. There are all sorts of reasons why even very fair-minded experts, wanting to give the early leaver a fair deal, might dispute what would be the appropriate amount for the pension trust to pay out. In the first place, one has to make an assessment of the likely effect of inflation and what it may have done to the employee's rights while they were building up in the fund.
Obviously, we are not talking about actuarial precision when dealing with purely speculative anticipations as to what may or may not happen to the retail prices index over the next 10 or 20 years or even longer. It is anybody's guess what one should allow for where inflation is concerned. The fact that people did not like guessing when they were having to write a cheque at the end of the day has meant

that there has been a reluctance to err on the high side: transfer values therefore tended to be kept rather conservative.

Mr. Tony Blair: Ha, ha.

Sir Brandon Rhys Williams: I did not like the hon. Gentleman laughing at that point, because conservatism is connected to rectitude.

Mr. Blair: I was certainly not laughing at the content of the hon. Gentleman's speech. I was just wondering when he would summarise the effect of new clause 1.

Sir Brandon Rhys Williams: The hon. Gentleman should be patient. I was coming to the precise effects of new clause 1. Without wishing to be critical, I am rather amazed that a man of the hon. Gentleman's intelligence and acumen has not immediately fluffed what new clause 1 will do.

Mr. Blair: I immediately sussed out what clause 1 means. I am wondering when the hon. Gentleman will get to it.

Sir Brandon Rhys Williams: I have been working on the subject for 19 years, so I think I might be permitted to resume my campaign for just 19 minutes. If I do not go over this ground, my attempt to do something for the early leaver today will be as futile as my other attempts over the last 19 years. Therefore, I hope that the House will give me the indulgence of allowing me to explain my case in my own way.
The genuine difficulty that still remains and that I am seeking to address head-on in my new clause 1 is that, in a final salary scheme, the calculation of the amount of benefit that the employee would get if he or she stayed until the normal age of retirement has to relate to what the person is earning at age 62, 65 or whatever is the normal age of retirement in the scheme. If someone goes to their employer at age 45 when they are not earning anything like the full amount that they might hope to get if they stayed with that employer and continued to get annual increments, promotion and the rest, somebody has to make a guess as to what the person might get if they followed their normal trajectory to retirement and got as much as they could, even staying in a firm that, in the opinion of the employee, will not give him or her the full amount of entitlement that the employee is entitled to and that they think they will get if they go to another firm that might put a higher value on their work.
Even if one stayed with an employer where one thought that one was not being fully used, once one has achieved a certain level of seniority, it is a reasonable expectation that one will continue to get increments and possibly promotion that will take one up to a final salary when one eventually leaves that will give one a handsome pension. However, if one related one's pension to what one was earning at the time of severance 10 or 20 years before, one is worse off, because one might be only half way to one's ultimate final remuneration, quite apart from the effects of inflation.
Under the system that is almost invariably in use at the moment, when someone notifies their employer that they wish to leave, they tend to have their transfer — or preserved value, if they chose to leave their money in the first employer's trust—valued on the basis of what they are earning in mid-career, which is not the same as what


they might reasonably expect and hope to earn if they stay another 10, 20 or however many more years it might be, in that pensionable service.
In calculating the final salary on the basis of the salary in mid-career, the employer's trustees are taking advantage of the early leaver in a way that is sometimes exceedingly damaging, quite apart from the inflation expectation. Although we have made progress in recent years, we have not made nearly enough. I am reliably informed that the amount of money that early leavers are losing every year from their entitlement under the present regime is of the order of £1,000 million. The House must reflect on that figure.

Mr. Tim Smith: Could my hon. Friend give some indication as to how that figure was calculated?

Sir Brandon Rhys Williams: It has already been suggested that I am speaking too long. I would prefer to take aside my hon. Friend—who problably knows more about those subjects than and tell him how I derived that figure. It would be wrong if I disclosed the origin of that figure, because it was given to me in confidence. However, I would be glad to discuss it with my hon. Friend afterwards. I think he will agree that, if anything, I have erred on the low side, as that is what I am reliably told.
The figure of £1,000 million being lost from pension assets by people seeking to better themselves and to make the most of their contribution to the economy is so serious that the House must return to the subject, to see whether what we are doing at the moment is enough. I feel very strongly that it is not enough.
4 pm
Under the state earnings-related pension scheme, the guaranteed minimum pension is protected from inflation and employers have to respect that accruing entitlement. That is a plus, in that it is a sort of portable pension. Unfortunately, however, SERPS is on such a small scale that we are not really concerned with very large assets. I cannot say what the SERPS entitlement is likely to be, but I suppose that it is about a quarter of the amount that would accrue for a similar earnings record for a person working in the public sector. That means that the employee in the private sector will not do very well if he or she relies on SERPS. On retirement, the income from the occupational pension would probably be just about enought to rule the person out of entitlement to supplementary benefit, without doing him or her much more good than that. I do not believe, therefore, that the guaranteed minimum pension concept in the SERPS provision has solved the problems.
Since 1985, it has been obligatory for employers to protect the assets of the early leaver on the basis of a certain calculation, the merit of which is that it goes right back to the start of the employee's service, not just to 1985. For people who started working in the mid-1960s, therefore, under the new provisions everything that they accumulated since they began pensionable service now has to be protected.
The method of protection, however, is very partial in terms of inflation. I am on such technical ground here that I may risk misleading the House, but I believe that if the early leaver opts for preservation of the asset in the original employer's fund, inflation is put at a maximum of 5 per cent. That may not be a disaster in view of the present Government's record in defeating the vagaries of inflation,

but some other Government may be returned at some time in the next 20 or 30 years which allows currency depreciation to start up again. In that case, a fund which increases at only 5 per cent. per annum will slowly chisel into the real value of the asset. If an asset is exposed to that risk, anyone seeking to set a value on it now is likely to say that it is not a cast-iron asset because in certain circumstances it could depreciate seriously. That being so, if the employee insists on taking a cheque equal to the value of the preserved assets at this stage, it may well have to have the corners knocked off. Therefore, if the employee opts to take a cheque rather than leave the money with the original employer, the inflation maximum set on the provision for inflation will mean that the cheque will not be quite so good as it should be.
Secondly, I understand that the obligation to revalue applies only to that part of the entitlement which accrues after January 1985, so if a person has 20 years service before that date, a substantial part of his of hers accrued rights will not be inflation-protected. Setting a value on the preserved asset will inevitably take that into account, to the benefit of the employer, so when the employee takes his transfer value and advances with it to the trustees of the fund that he is entering, instead of having 20 years service with his first employer automatically credited, he may be offered five added years or some other very disappointing figure. Clearly, that will reduce the value of the final pension so substantially that the employee will be calling for a golden hello or whatever also in order to make up the difference. Difficult negotiations then ensue, often resulting in the breakdown of discussions and a decision to remain with the first employer, which is not really to the advantage of anyone.
In addition to those two aspects of inflation protection, which are clearly inadequate, there is the problem of the trajectory. I do not know of any fund where, in the valuation of a preserved or transferred asset, a serious attempt is made to decide what the employee would have earned if he had stayed and thus what the fund owes him on the basis of a good average calculation of what pension he might have received had he stayed with the first employer. The employer does not feel under any obligation to make that calculation and does not pay out on that basis.
Yet when the actuaries advise the employer how much money is needed for the fund to meet its liabilities over time, they will say that, although they do not know which employees will reach the top, it is certain that some of them will. The employer therefore has to put money into the fund to cater for the fact that some present employees will be receiving much higher salaries and therefore will qualify for much higher pensions by the time they finish their service. If the employer is to maintain an adequate fund, that money must be put in, but it is not paid out to the early leaver. The money that should go to the early leaver remains in the fund, with the result that the fund becomes over-funded and the employer is advised either to put in less money in future or to take some money out. However, that aspect can perhaps more appropriately be dealt with on another new clause.
I have reached the point at which I am able to gratify the hon. Member for Sedgefield (Mr. Blair) by describing my reasons for the proposals in new clause 1. An avid reader of the Order Paper such as the hon. Gentleman will realise that it is virtually identical to a new clause that I moved during the report stage of the 1986 Finance Bill. I


have not significantly altered the proposals, save perhaps to remove certain ambiguities. The point to which I would like to draw attention is the method of valuation.
The new clause suggests that the transfer value should be equal to the amount of money that the scheme that the employee is leaving would insist on being paid, by way of an incoming transfer value, in order to take on an employee with precisely the same status as the man or woman who is leaving. That takes into account all the points that I have dealt with thus far, including assessment of the trajectory to retirement.
I know that there are difficulties in valuation, but I am confident that, if the House accepts that this is the right formula, the actuarial profession and experienced trustees will very soon adapt their thinking to produce standard guidelines for valuation which would provide at any rate rough and ready justice for every early leaver. Unless we adopt something along those lines, the problem will continue year after year and the early leaver will remain exposed to injustice, and I am sure that that is wrong.
I will dilate just a little longer on what I am proposing. Clearly, I am speaking of final salary schemes. With money purchase schemes, the position is clear, just as when a person takes money from one clearing bank and puts it into another. There is an identifiable figure and everyone knows what it is. Final salary schemes, however, are fluid. They are collective funds and the valuation of the individual's assets at any given time presents great difficulties; but if one insists that all the questions of trajectory to final retirement, length of service, salary and other terms of employment should be taken into account on precisely the same terms that the first employer's scheme would have to accept in reverse, one arrives at a fair transfer figure.
If that transfer figure is then taken to another fund that is run on quite different lines — perhaps having a different age of retirement, different rates of accrual, or different types of benefit — it will not matter, because one would be speaking about a cash value. Once the cash value has been put at a fair figure, it is up to the employee to negotiate for himself when he goes to his new employer and seeks to acquire added years or whatever it may be in the new fund.

Mr. Blair: The new clause addresses an important matter. How does it get around the difficulty of the early leaver who may go on to much better things in later life if one makes his transfer payment the same as will be required by his scheme on the admision of a new member with exactly the same service and all the rest of it? I am not sure how the problem will be resolved by the new clause.

Sir Brandon Rhys Williams: People are going to take different views about the quality of a man in mid-career who is footloose and wants to change his employment. The first employer may say, "He has been working for us for 20 years, and we know his limitations. We do not think that he will ever make it to the board or to the head of his department. We do not think that he is of that calibre. Therefore, his trajectory, if he stays with us, will not be that progressive. You may think that he is a wonderful chap and you may be willing to pay him all sorts of bonuses to take him over, but our opinion is based on experience. Therefore, we do not think that his trajectory should be as high as all that." That may be the case; but

at any rate my formula takes a realistic trajectory into account with the first employer. If the second employer is putting a rather ridiculous premium on the man, that is up to the second employer. He can use golden hallos, or whatever it may be, to tempt the person across.
It is not only salary or pension rights that have to be taken into account in the negotiations to tempt a senior person to change jobs. Other factors may include location, housing or many other matters. But we have to arrive at a fair method of assessment of the size of the asset that has accumulated for the employee in his first employer's fund. Therefore, one has to get the first employer to focus on the eventual salary that that person might receive if the stayed in that employment, rather than the figure that he happened to be earning when he got so fed up that he decided to leave the firm. At that stage the employee was probably making a fair assessment that he was underpaid for what he could do; that would be why he was thinking of going.

Mr. Blair: Will the effect be to make the transfer payment out the same as the payment in would be if they were welcoming an incoming member of exactly the same status into the scheme?

Sir Brandon Rhys Williams: That is precisely the purpose of the formula that I have arrived at. Let us imagine that the firm has to fill the vacancy. Suppose it decides to recruit precisely such a person as the man it has got and starts to consider what it will have to pay and what pensionable service would be appropriate to credit the man joining the scheme for someone whom the firm perhaps does not consider to be a man whom it is recruiting for ultimate promotion to the board but whose trajectory would be precisely parallel with that of the person whom it does not evaluate particularly highly who, nevertheless, is in a fairly senior job in middle life. The conventions and casework could soon build up. If the House decides that this formula is appropriate, it will not be long before professionals would be able to come to an agreement that will result in a clear settlement on a figure.
In the early days, once the House accepted this formula, there would be room for disputes. There will always be room for disputes. Professional opinion will quickly come to a consensus, however, and I am sure that in 99 per cent. of cases an early leaver will be willing to leave it to his advisers to settle on a figure, and that figure would be accepted. We will not see endless disputes after a year or two if the House accepts my formula. At all events, that is what I am advised by people who work in the profession.
When an employee gets to his new firm, he will have a cheque of perhaps quite a large value. He must negotiate with that cheque to get what terms he can. If the new firm's scheme is totally different—it may be contracted out, whereas the other was contracted in, or it may be based on a different age of retirement of totally different accrual basis—he must negotiate his entry into the new firm. That is up to him; but he will bring a cash value with him equivalent to what he has withdrawn from the previous scheme.
I have to draw attention to a serious point in my new clause. In a case where someone is leaving a firm in which the pension fund is not fully funded, if he insists on taking out the whole of his asset, he is diminishing somewhat the amount of money that is available to meet the liabilities


of the fund to the other employees who remain with the first employer. If we are talking about just one or two people leaving a large firm over the course of time, that may not be important, even if the scheme is seriously underfunded for one reason or another. But if, for instance, a firm is hitting a bad patch and is in difficulty in funding the scheme anyway and many people decide to leave or are encouraged to leave early because the firm is not able to offer them much of a future, and if they use my formula as the basis of valuation, the early leavers might take so much out of the fund that it becomes totally unable to meet its liabilities to those employees who remain faithful to the firm. That is not my intention. It would merely put an early leaver in a position to cheat the stayers. That is not what I want.
I have therefore made the provision that, when a scheme is underfunded, an early leaver has the option of either taking a transfer value that is reduced by the percentage to which the scheme is underfunded, or leaving a preserved asset with the employer that would constitute the full amount of the asset. The employer would then have to honour the commitment at the normal age of retirement, which might be many years afterwards. That is not an attractive choice for the early leaver. If he is leaving the firm because he has doubts about its viability, he may not be too happy about leaving his preserved asset in the hands of trustees who may not have all the money that they need, even 20 years hence, to pay out according to the real value of his asset. Equally, if he takes a transfer value that must be diminished by 10 per cent., 20 per cent. or 50 per cent. because the fund is underfunded at the moment he insists on his cheque, he puts himself in a bad position when he negotiates with the new employer, or, for that matter, puts his money into a private pension scheme under the options that are now opening up under my right hon. Friend's proposals.
It is an invidious thing to be leaving a fund that is in low water. In that case, one may find that one's private sector pension scheme does not give the same security that one would have if one had been in the public sector. We must take that fact into account. Inevitably, private sector schemes are subject to the vagaries of the market and the future of the employer and other factors, whereas schemes that are underwritten by the taxpayer have a sort of cast-iron security that the private sector finds it difficult to match.
The House has been extremely indulgent with me in allowing me to explain all these points. I look forward to hearing what other hon. Members may have to say, particularly what my right hon. Friend may have to say. The Departments concerned with occupational pension matters have had an opportunity of looking seriously at my proposals. They are not new. I introduced them a year ago in a similar situation. There is an overwhelming consensus that the present way of dealing with early leavers is unjust and contrary to the national interest. If my right hon. Frend accepts that fact but does not accept my new clause 1, the House is entitled to insist on his putting forward a better alternative.

Mr. Tim Smith: I congratulate my hon. Friend the Member for Kensington (Sir B. Rhys Williams) on his ingenuity in devising the new clause, getting it on to the Amendment Paper and ensuring that it is debated, because it is not a clause about taxation at all. It relates to occupational pension schemes, and my hon. Friend has

included within it a device to ensure that it is a taxation clause because he wants to withdraw tax privileges for any occupational pension scheme that refuses to comply with the arrangements which he believes to be desirable.
The first objection to the new clause is that that is the wrong way to go about it. It is justifiable for the law to intervene in occupational pension schemes notwithstanding the fact that they are voluntary. Social Security Acts have done so in the past, and will no doubt do so in the future. To use the blunt weapon of tax privileges to say, "Either go along with my new clause by 1 January 1988 or lose your tax advantages", is rather unreasonable. Unless I have misread it, that is what my hon. Friend's new clause would do. He must make a better case. The new clause includes the words, "It shall be permissible", as though it would be permissive, but it is not. If the occupational pension scheme does not comply with the new clause within a very short period, it will lose all its tax benefits.
My hon. Friend has a great interest in these matters, but sometimes he goes too far. He is hostile to the final salary scheme to the point where he would like it to be broken up so that each member can have his own pension scheme. I think that it is good to have a diversity in pension provision and good that, in the future, individuals will be able to choose between an occupational scheme and a personal pension scheme.
When the time comes, it will be important properly to explain the differences between the two, because as 1 January approaches and people decide whether to opt for personal portable pensions a great campaign will be launched by the companies that wish to sell the schemes. They will be trying to sell the virtues of opting out of SERPS and occupational schemes and going into their personal schemes. It will be important for employers and others to explain to employees the benefits of occupational pension schemes. Listening to my hon. Friend, one would think that there were no benefits worth talking about in occupational pension schemes. But I believe that there are, and that those benefits have been substantial at times of fairly high inflation. The opportunity to have a guaranteed pension related to one's final salary has been a great advantage, and I hope that when the time comes there will be a balance in the debate that takes place and that employees will be told about the pros and cons of both.
The other day, I received a paper from the National Association of Pension Funds which is naturally concerned about the matter and which will do what it can to explain the virtues of occupational pension schemes.
The new clause deals with the problem of the early leaver, and there is no doubt that, in the past, the early leaver has been ripped off. I have been ripped off as an early leaver. But we have made improvements since then. My hon. Friend belittled the improvements that were made in the Social Security Act 1985. One has to strike a balance here. As well as having been a member of a private occupational scheme, I have had to run one. We must realise that the schemes are voluntary and that, in theory at any rate, an employer could wind them up at fairly short notice.
What is the object of an employer putting money into a scheme? He does so to attract employees to his company and to make them stay. He wants people to stay with the company, not to leave early, so he sees no reason why he


should bend over backwards to help the early leaver. That is why the legislature is justified in intervening and making sure that the early leaver gets a reasonably good deal.
The question then arises: what is a reasonably good deal? Where should the balance of public policy be on this matter? At present, the Social Security Act says that if one takes out a deferred pension now, it must be revalued by the increase in the retail price index every year up to a maximum of 5 per cent. My hon. Friend belittled that and said that inflation may increase above 5 per cent. He is right, but there must be a ceiling. An open-ended commitment for a pension scheme would be unfundable, and at present 5 per cent. seems to be a reasonable figure.
I am sorry that I did not have the opportunity to hear the debate on the new clause last year, but, as I understand it, my hon. Friend wants to give to the early leaver all of his expectations up to retirement, to say to him, "You might have been very successful in this company and you might have been promoted to chief executive, so we should take all that into account and try to evaluate what your final salary would have been on a rather optimistic basis", and then offer him a guarantee on that basis. If that is what my hon. Friend wishes to do, it is going too far.
We must allow the actuarial profession some discretion in these matters. My hon. Friend is trying to impose rules upon a profession in which a considerable amount of judgment is involved. All sorts of assumptions must be made when calculating the value of a transfer payment, especially about interest rates, inflation and earnings growth, and to impose rigid formulae on the actuaries would be unreasonable. It is not surprising to me that the actuary acting for an employee leaving a scheme may take a different view from the actuary dealing with an employee entering a scheme.
My hon. Friend's new clause would calculate that amount by reference to the amount which would be payable by someone coming into the scheme. That is a purely notional concept, because people bring into a scheme something that is related to their previous pension scheme. My hon. Friend is talking about something that does not exist in practice—a notional sum that would be needed to fund all the back service of that individual had he been the individual who was leaving in the first place. That can be calculated only by reference to the current salary. It does not take us all the way that my hon. Friend wishes to go.

Sir Brandon Rhys Williams: I am following my hon. Friend extremely closely, but I think that what I suggested was something which, arithmetically, is quite easy to arrive at. One knows the age of the person who is leaving, so that is not a matter of dispute. One knows the salary which he is earning at the time of his leaving, so that is not a matter of dispute. One can calculate the conditions of the scheme which would determine the capital value of the asset, because it is the scheme which the employer operates. One need not even guess what the pension scheme might be. One knows the scheme, the age and the salary. Where does the dispute arise?

Mr. Smith: None the less, it is a notional amount and it is subject to the criticism that was made by the hon. Member for Sedgefield (Mr. Blair). It cannot anticipate the future performance of an employee, so it does not give to the employee the benefits which I think my hon. Friend

said the early leaver would gain from the new clause. If that is the case, it would be a good thing, because it is wrong to go as far as my hon. Friend wishes to go.
Although I have great sympathy with the early leaver, it is wrong to go as far as my hon. Friend wishes to go and to impose such substantial obligations on occupational pension schemes as the new clause would do.

The Financial Secretary to the Treasury (Mr. Norman Lamont): During the Second Reading of the Finance Bill, my hon. Friend the Member for Kensington (Sir B. Rhys Williams) spoke after two maiden speakers and told them that he always worked on the Jericho principle. He recalled the story of Joshua's troops, who finally brought down the walls of Jericho by going round and round the city. He said that one should not be put off if an angel came along and said that it was hopeless. He said that one should go round the walls yet again and eventually they would fall.
We have not been round this city six times, but we have certainly been round it three or four times during the debate. The walls are trembling a little. My hon. Friend has advanced his case and educated hon. Members, including me, although the House will be indebted to my hon. Friend the Member for Beaconsfield (Mr. Smith) for putting the counter case for the final salary scheme.
My hon. Friend the Member for Kensington has consistently advocated the money purchase scheme and underlined the problems that the final salary scheme creates for the early leaver. I have great sympathy for what he says and I do not believe that we have a solution that entirely meets all the aspects of the problem of the early leaver. Such a solution would impose considerable costs on industry.
4.30 pm
It may be for the convenience of the House if I underline the way in which the problem my hon. Friend the Member for Kensington has described arose. To take a simplified example, suppose someone worked for 10 years for employer A and earned £12,000 a year. If that person left in mid-career, on normal rates of accrual— one sixtieth final salary for each year of service — his deferred pension would be ten sixtieths of £12,000, which is £2,000. If that person then worked for 10 years for employer B and retired with a final salary of £24,000, his pension from employer B's scheme, on normal rates of accrual, would be ten sixtieths of £24,000, which is £4,000. Therefore, his total pension, assuming for these purposes zero inflation, would be £6,000 — that is his pension entitlements of £4,000 plus £2,000. If that person had stayed with employer A and served 20 years to retirement, his total pension would have been twenty sixtieths of £24,000, which is £8,000.
It is in that case that we come to the problem of the transfer value because if he had transferred his rights from scheme A to scheme B when he changed jobs, on present actuarial rules his transfer value might have been about £18,000. This would not buy him 10 years' additional service in scheme B. It would buy him only additional benefits equivalent to a pension of £2,000 a year. The transfer value to buy him the equivalent of 10 years' additional service would have to be £36,000. That would be double his present entitlement under the rules of the scheme.
In his new clause, my hon. Friend has set out certain proposals relating to transfer values, paid by occupational schemes, which provide benefits based on the length of


service at final salary. My hon. Friend is proposing that the Government should effectively require schemes to provide transfer values on that improved basis. My hon. Friend the Member for Beaconsfield was quite right to say that it is not quite as permissive as the clause seems at first sight.
When we discussed this matter in Committee, the hon. Member for Sedgefield (Mr. Blair) tabled a similar amendment as did my hon. Friend the Member for Kensington. I made the same objection then, although it was probably true of one but perhaps incorrect about the other. As my hon. Friend the Member for Beaconsfield has said. it would require the schemes to provide higher transfer values because my hon. Friend the Member for Kensington would use the weapon of the tax system. Although the new clause would give schemes the option to change their tax rules, if they opted not to they would cease to be tax-approved. I must make it clear to my hon. Friend that if we were to go down that road, as my hon. Friend the Member for Beaconsfield pointed out, the requirement would be a matter for the DHSS and not the Revenue. As my hon. Friend the Member for Beaconsfield underlined, Revenue tax approval rules are concerned with setting maximum benefits, and the Revenue rules on transfers follow the DHSS.
As my hon. Friend the Member for Kensington knows, the question of transfers was considered in detail two years ago when the Social Security Act 1985 was before the House. Following that Act, regulations on transfer value were made following extensive consultations. Those regulations came into force on 1 January 1986. As I have advised my hon. Friend previously, in considering proposals for further changes, DHSS Ministers have taken the line that it would not be right to impose new requirements on schemes so soon after the recent legislation until there has been sufficient time to assess their effects.
Notwithstanding this, however, in my view the proper place for a provision on these lines proposed by my hon. Friend lies in social security legislation. As I have said previously, I shall ensure that my hon. Friend's proposals are reconsidered by my right hon. Friend the Secretary of State for Social Services together with either myself or my right hon. Friend the Chief Secretary.
I know that my hon. Friend the Member for Kensington was not very receptive to this when I put it to him in Committee, but we must have regard to the cost of pension provision to employers. The funding position of occupational pension schemes is reviewed by an actuary every few years to determine the level of contributions that is needed to keep it solvent. My hon. Friend's suggestion could impose considerable extra burdens on industry. In reviewing the funding of the scheme, the actuary must take account of the fact that some scheme members will leave in mid-career taking with them a transfer value based on their final salary and their service up to when they depart. If, as my hon. Friend proposes, the transfer value for every early leaver had to be calculated on a higher basis, that would inevitably depress the scheme's funding position. The actuary would have no option other than to recommend a higher level of contributions and the main brunt of that extra cost—in most cases, all of it—would fall on the employer.
I am grateful to my hon. Friend the Member for Beaconsfield for at least putting the case for the final salary scheme, which provides some certainty for some

employers. My hon. Friend the Member for Kensington has said that he does not like that because it leaves the problem of the early leaver. However, as my hon. Friend the Member for Beaconsfield has said, we are moving towards a time when there will be wider choice and more and more people will be able to take out personal pensions which are more akin to the model which my hon Friend the Member for Kensington supports, and which will help to overcome that problem.
My hon. Friend the Member for Kensington points out that in recent years many schemes have become overfunded—so much so that they have been able to reduce contributions or even to make a refund to the employer. Of course, that is right, although I do not believe that it applies across the board to all schemes, nor do I necessarily believe that it is unfair that employers should enjoy some benefit from the good years when it is only about 10 years since the bad years, with negative investment returns, and when employers had to make contributions of 25 or 30 per cent. of payroll to keep their schemes solvent. I am sure that my hon. Friend remembers that. We are talking of a different world now. In the early 1970s the world appeared different.
Again, as my hon. Friend the Member for Beaconsfield has pointed out, the fact is that occupational schemes are voluntarily established by employers for their employees. Because employers who establish final salary schemes are taking on an open-ended commitment, it is important to allow them as much freedom of choice as possible, including the freedom to promise whatever benefits are considered affordable.
My hon. Friend the Member for Beaconsfield emphasised that if employers were effectively required to provide benefits that they did not think they could afford —bearing in mind that, above all, pension schemes are a long-term business — the danger is not only that employers would not set up new schemes but, as my hon. Friend has said, that some schemes might be wound up. I know that my hon. Friend the Member for Kensington will not be persuaded entirely by my argument. However, I advise him that we shall certainly consider the matter further and myself and a Minister of State at the DHSS will discuss it with him.
We have said repeatedly to my hon. Friend the Member for Kensington that such a radical reform could not be introduced through the tax system at this stage in a Finance Bill. However, I agree with him that considerable problems still relate to the early leaver. Those problems must continue to be addressed. They are paramount and we must consider them extremely seriously. For that reason I am afraid that it would not be right to accept the new clause as it is, so I fear that I cannot accept my hon. Friend's recommendations, persuasive though they are.

Sir Brandon Rhys Williams: With the leave of the House, Mr. Deputy Speaker, I should like to reply to the points that have been made.
My hon. Friend the Member for Beaconsfield (Mr. Smith), whose opinions I greatly respect, said that it was good to allow final salary schemes as an option. I do not disagree with that. However, the employer has a responsibility to put something aside for his employee all the time in the form of deferred pay. That should be an identifiable sum. Preferably it should go into one of our tax haven schemes, build up compound interest and be


available to provide an annuity at the end of the day. That does not mean to say that an employer cannot have a final salary scheme on top of his minimum obligation.
The minumum obligation that is imposed through the SERPS rules is far too small and I suggested in Committee that employers should put at least 10 per cent. on top of wages into provision for retirement. Anything less than that will leave many employees in a position where, when they come to retire, they must apply to the taxpayer for benefit in the form of supplementary benefit. That is an unsatisfactory state of affairs. To compensate for that extra burden on employers, I threw out the hint that the Inland Revenue might agree to forgo national insurance contributions, which are simply a form of income tax. I am not hostile to final salary schemes, provided the employer has first met his minimum obligation, which means to all employees, not just early leavers, whom I am dealing with in the new clause.
My hon. Friend said that final salary schemes were welcomed during the long period of inflation because they were protected up to the time when the employee left service at the normal age of retirement. Thus the inflation which took place during the course of his career was borne by the scheme and at the date of retirement his pension was awarded on the basis of the value of money at that time. That is true; but look at the deplorable record of occupational pension schemes in looking after beneficiaries after retirement. I believe that only 2 per cent. have undertaken to give full uprating to pensioners after the date of award. Therefore, the final salary scheme does not do so much for beneficiaries after they have left employment.

Mr. Tim Smith: I cannot allow my hon. Friend to get away with that. It is difficult for trustees of an occupational pension scheme to give any guarantee. Again, it is open ended and no one knows what the rate of inflation will be. Large occupational pension schemes — I think of our multinational companies — have a tremendous record on uprating pensioners' benefits after retirement.

Sir Brandon Rhys Williams: I know that occupational pension schemes have often in good faith made a gesture to their pensioners after retirement and have sometimes uprated benefits substantially. The figure up to 1983 that I was given in a parliamentary answer—if the figures were up to date they might be different, and admittedly they were out of date — was that only 2 per cent. of schemes had uprated fully by the amount of the retail price index. That does not seem to be a frightfully good record. I understand that it is difficult in dealing with fluid funds and unidentifiable assets to give justice to all concerned. That is an intrinsic fault of the final salary system. Money purchase obviates that weakness altogether, because the position is as clear as if one had one's money in a bank account.
My hon. Friend then said that the schemes were voluntary and that it was possible for employers to wind them up. I mention that as one of the bad reasons why we are where we are. Employers still tend to regard their pension funds as a bonus, not as an obligation. In the 1920s or 1930s it may have been a reasonable aspect of personnel management to run a pension scheme as a sort of Venus's flytrap, to get people to join one's fund and

then to find themselves stuck because if they leave they have to write off so much. I do not think that nowadays that is regarded as an acceptable form of personnel management.
It is not healthy to have senior people in one's firm who wish to leave if they could only do so without losing their pension rights. To keep people doing work which is less good than they are capable of is only breeding sickness. I can speak from personal experience of working in industry where people were kept back by their pension fund and did not have a happy end to their career. Unfortunately, one sees similar effects in many Civil Service departments, where people mark time and block promotion lanes because of the nature of the final salary scheme.
Naturally, the employer who runs a super-generous scheme can change the policy and wind it up. But in setting the state earnings-related pension scheme and deciding to retain it, which the Conservative Government wrongly did, we have accepted that there is an element of deferred pay in the pension scheme and employers are obliged to pay deferred pay. We now need to bring the private-sector pension schemes up to the level of the public-sector schemes. I do not see why people working in the private sector should be second-rate citizens in retirement. We must do something about all our thinking regarding the deficiencies of the occupational pension schemes in the private sector.
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My hon. Friend said that my new clause was obligatory, not permissive as it seems. With respect, he has not quite penetrated to the actual meaning of my suggestion. Suppose the sponsors or the trustees of the scheme refused to do what I am suggesting in this new clause after it has become law. They would not lose their tax concessions in respect of the whole of that accrual of value up to the date when my new clause would become operable. That is why it is not a retrospective provision. One must find a way of overcoming the argument that anything which benefits the early leaver who has a long record in his fund will be of a retrospective character. I would like to suggest to my right hon. Friend that he has not given sufficient attention to this aspect of the problem.
If one benefits someone who has had perhaps 30 years in the pension fund in relation to those assets which he has accumulated over that period, it might well be said that one would be making a retrospective change in the law, because the pension fund did not originally expect that it would have to give a fair deal to the early leavers—to those who chose to leave before the normal age of retirement. If we make it obligatory on the fund to do so in respect of those past years, we are putting a debt on the fund in respect of years which have gone by and where the accounts have already been closed. That is why it is important to say that it is only in respect of future years that pressure will be brought on the fund by the new clause.
Why should we not bring pressure on funds which are holding people unjustly in jobs where they are not doing their best? Why should we give tax concessions of this enormous value to funds which are not acting in the public interest or in the interest of their employees? My right hon. and hon. Friends must ask themselves why we give these enormous tax concessions to these schemes if they are not delivering the goods, but are treating people unfairly and acting against the public interest.
My right hon. Friend the Financial Secretary mentioned extensive consultations over the problem of the future of occupational pension schemes in general. It is true that there have been consultations, but one of the difficulties is that all the people who understand the law and practice of occupational pension schemes are employed by the sponsors of those schemes. They tend naturally in time to orient themselves towards the employers' interests because they get their bread and butter from the employers' side. Eventually, they find good reasons why claims made on behalf of employees should be set aside. They argue themselves into a firm belief that what the employer does is invariably right and what trade unions or individual employees argue on behalf of the wage or salary earner is in some way ignorant, excessive or biased, or at any rate not worthy of serious consideration.
For that reason, if one talks to the experts about the problems of occupational pension schemes, one tends to hear the employers' view. No one speaks confidently on behalf of the employees. The fact that no one from the Labour Benches has attempted to come to the support of my new clause once again emphasises my point. People who think it is their responsibility to speak for the employees fear to tread through these technicalities because it is a difficult subject. In my view, the consultations which have taken place have resulted in a raw deal for the beneficiaries. Therefore, I question their real worth. I believe that my right hon. Friend needs to widen his circle of advisers to take in people who will speak for the beneficiaries too.
My right hon. Friend said that it would be wrong to impose new requirements on schemes yet a while because of all the upheavals that have recently taken place. In Committee I drew attention to the fact that we are putting almost impossible administrative burdens on occupational pension schemes. That arises from the fact that we have dual control. The Inland Revenue is issuing extremely complex instructions relating to the Revenue's perspective of the way such schemes should be controlled—namely, in regard to the eventual benefits. In the last week or two, the Department of Health and Social Security also issued no fewer than 20 statutory instruments with meticulous instructions as to how those schemes were to be run. I am sorry to say that some of those statutory instruments are quite controversial and do not emanate from the discussions that we had in Committee. However, they are quite enough to burden these schemes with an enormous amount of administrative expense and problematical decisions.
I quite agree that the providers of occupational pension funds are probably sick to death of being told what to do, but that does not mean to say that we should allow them to continue to do what is wrong. We should simplify the regulations to the absolute bare minimum, so that everybody can understand the rights and wrongs and know what is expected of them. That is perfectly possible if we clarify our own ideas first as to what the pension schemes are all about. If we knew what the philosophy was, we would have no trouble with the details.
I cannot accept that this is simply a matter for the DHSS and that the Inland Revenue can wash its hands of the matter. The Inland Revenue must look after the taxpayers' funds. In occupational pension schemes, there is not only money put into trust by the employer or by the employee, but also a gradual roll-up of an enormous

element that constitutes money belonging to the taxpayer. The taxpayer has a huge stake in these enormous funds. The taxpayer will recover that money when the pension comes to be paid because tax is payable on the pension. I do not accept that this is simply a DHSS matter and not a matter for the Finance Bill. If the public are expected to extend tax concessions to the schemes, the public are entitled to expect the schemes to be run in a proper manner. At the moment, that is not happening.
My right hon. Friend spoke of the considerable extra burden on industry. If I am right in saying that the beneficiaries are losing anything like £1,000 million a year and that that ought to be rectified, that £1,000 million must come from somewhere because it is going to go to the beneficiaries. That might be said to place an enormous burden on industry, which industry cannot bear. At this time, the papers are full of the Government's problems — wages are rising faster than productivity. We are all delighted to read that profits in industry are rising rapidly at this time. I am sure that that is a welcome sign. That means that the average employer is in a position to put more money out for the remuneration of employed workers, salary and wage-earning employees. Why not put that money into the pension scheme, that is, into the capital account, instead of putting it into the wage packet, which constitutes the current account? We all know that there is a risk of incipient inflation taking off again because, to quote the well-known phrase, "There's too much money chasing too few goods." Why not encourage employers to put more money into the capital account? The money would only be recycled by the occupational pension fund trustees, on the basis of the advice they receive, back into industry in the form of investment. Industry would not lose the money; it might even be argued that it would gain it in the form that is most required.
If pensions were better, wage increases might be smaller just now, but there would be less immediate inflationary pressure and there would be more money flowing into investment on capital account. Surely that must be good. and if anything it would tend towards lower interest rates and a better, more efficient capital market.
I do not wish to ask the House to go further with my new clause. I am grateful to right hon. and hon. Members for listening to my arguments. I will reluctantly ask leave of the House to withdraw my new clause; but I hope that the arguments that I have put forward will not be wasted and that some of the things that have been said against my new clause—I believe those arguments were inadequate to beat it down—will be reconsidered in the not too distant future.
I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 3

PERMITTED EXCESS OF THE FUND

'In Schedule 12 to the Finance Act 1986 the prescribed maximum by which the value of the assets of an approved retirement benefit scheme may exceed the liabilities of the scheme for the purposes of paragraph 6 of the Schedule shall not be less than 10 per cent.'. — [Sir Brandon Rhys Williams.]

Brought up, and read the First time.

Sir Brandon Rhys Williams: I beg to move, That the clause be read a Second time.
I believe that this is a matter that can be dealt with quite briefly because this clause provides an opportunity for my right hon. Friend to explain his position rather than that I should be obliged to expound my argument at any great length. Therefore, I hope that my right hon. Friend is ready with his case.
If I may explain briefly, this new clause arises from a perfectly proper decision taken by the Chancellor some 18 months ago that the tax haven status of occupational pension funds should not be exploited by corporate treasurers putting money into the fund far in excess of any reasonable expectation of liabilities of the fund over time, in order to take advantage of the tax haven status. That status gave complete exemption from tax on putting the money in and, as things used to be, complete exemption from tax on taking that money out. It was a glorious opportunity for large and small corporations, which temporarily had a surplus of funds, to put the funds to employment in a way that exploited the tax advantages which were intended for the pension fund beneficiaries, but which actually flowed back to the firm and were an abuse of the intentions of the Inland Revenue.
My right hon. Friend the Chancellor decided, perfectly properly, that money recouped from trusts that went back to the employer should pay a substantial rate of tax, recognising the fact that when the money was first taken out of the general funds of the company and put into the pension trust it was a tax-exempt transfer. To make certain that these things went right, my right hon. Friend suggested that funds that had got themselves overfunded should bring their funds down to 105 per cent. of their liabilities forthwith and incur the tax on making the adjustment.
Of course, there was a great deal of agitation in the pensions movement about those proposals. Compromises were suggested, some of which were right. It was suggested that, before the pension fund repaid the money to the employer, much should be done to improve the way in which the pension fund operated for its real purposes—namely, to provide benefits for the employees. I believe that much more could still be done. That is obvious from what I said on new clause 1. There has been and still is genuine concern that the 105 per cent. of the liabilities of the fund, as calculated at any one time, may not allow enough margin as things develop over time — inevitably unpredictably — for a prudent firm to say that it is operating its pension fund sensibly. If the trustees repay the fund to the employer and incur a lot of tax in so doing, it may well be found that 5 per cent. is not a sufficiently large margin to cater for all the changes and chances of this fleeting world.
When we heard the reasons why 5 per cent. had been chosen and why the Government intended to stick to 5 per cent., it appeared to me that the benefit of the doubt should be given to the Government Department concerned. However, as I know that there has been a continuing anxiety that, in some cases, 105 per cent. does not allow enough latitude even for prudent firms to manage their affairs in accordance with their predictable liabilities, I hope there might be some room for movement. I have suggested the figure of 10 per cent. simply because it is a round figure and because this subject should be kept alive and we should not leave the Finance Bill without

giving my right hon. Friend the opportunity to tell us about the discussions that have taken place and to explain his future intentions.

Mr. Norman Lamont: I hope that I may be able to allay some of the fears of my hon. Friend the Member for Kensington (Sir B. Rhys Williams). Although we are not immutable on this matter, I believe that my hon. Friend's fears are a little exaggerated.
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My hon. Friend the Member for Kensington said, quite rightly, that we had two aims when we brought forward our proposals last year— first, to discourage employers from parking spare profits in their pension schemes in order to delay or escape a tax charge, and, secondly, to reduce the uncertainty about when and in what circumstances an over-funded pension scheme can pay part of a surplus to an employer. Action was necessary not only to require heavily over-funded schemes to reduce surpluses, but also to clarify the rules regarding the possible scope for payments by schemes to employers, subject always to the overriding need fully to protect the prudential interests of scheme members.
The case for action was generally accepted, but, as my hon. Friend said, considerable concern was originally expressed that our proposals did not contain adequate safeguards. In particular, it was at first claimed that the proposed safety margin of 5 per cent. beyond which a surplus need not be reduced was too low.
As we made clear last year, the safety margin has to be considered in the context of other changes. I think it is fair to say that the criticisms that were made under-estimated the strength of funding methods and the security of the actuarial assumptions which will apply for these purposes. On the advice of the Government Actuary, these were deliberately chosen as being at the top end of the range. A 5 per cent. surplus on this basis is a much larger surplus than the funding methods and actuarial assumptions adopted by most pension schemes in this country.
During the passage of last year's Finance Act through Parliament, we issued draft guidance notes on how the new rules would operate. These set out in some detail the proposed funding method and actuarial assumptions and they immediately reassured many of those who had previously expressed concern about these proposals. I must say that I am slightly surprised at what my hon. Friend the Member for Kensington has said about the reaction because it does not entirely tally with the reaction as it has been relayed to me.
Subsequently, the detailed provisions setting out the new rules were implemented when, under the powers conferred on it by schedule 12 of last year's Act, the Inland Revenue laid the Pension Scheme Surpluses (Valuation) Regulations. These provided, among other things, for the strong actuarial basis which would operate for these purposes, and for the margin of 5 per cent.
The question of pension scheme surpluses generally and the related issue of the investment policy of schemes have attracted a certain amount of attention. My hon. Friend the Member for Kensington, and some Opposition Members, argue that, as a matter of principle, first priority should be given to members. That is a separate matter, which goes rather wider than this new clause, and rather wider than my hon. Friend went.
We must remember that occupational pension schemes are arrangements made voluntarily by employers to


provide retirement benefits for their employees. The requirements of the Inland Revenue, in considering whether schemes should be tax approved, take no view on such matters as the level of benefits. Provided that the maximum limits are not exceeded, the Revenue leaves schemes free to fix benefits at whatever levels are considered appropriate.
Another argument is that pension scheme surpluses belong to members. I am aware of this line of argument, but in law, of course, members of occupational schemes have only a contingent right to benefits when they reach the relevant retirement date. They have no direct legal interest in any of the assets in the fund, whether or not they have paid contributions. As the House will know, many schemes are funded entirely by the employers' contributions.
Then, of course, there is the question which exercised people very much last year of employers raiding the pension schemes—a danger which, I think, has perhaps been exaggerated. Occupational schemes are, as the House knows, established under irrevocable trusts, and the interests of members are protected by general trust law. Moreover, the 5 per cent. additional margin and the 40 per cent. free-standing tax charge on refunds will act as a powerful safeguard against employers seeking to withdraw scheme funds without proper regard to the interests of their members.

Mr. Blair: One of the matters that concerned people was whether the 5 per cent. excess of the assets over the liabilities took sufficient account of the difficulty of assessing precisely what the value of the assets and liabilities may be, given the number of variables involved. Has the Minister been satisfied from the representations received subsequent to the Finance Act last year that the 5 per cent. margin covers any margin of difficulty in assessing the true value of assets or liabilities?

Mr. Lamont: I am satisfied. I was about to say to my hon. Friend the Member for Kensington that his fears are exaggerated. They do not correspond with what I hear.
The precise point put by the hon. Member for Sedgefield (Mr. Blair) is, of course, a technical matter. It would be a lengthy matter for me to seek to say how the Government Actuary chose to define 5 per cent., which was on a different basis from that presumed by the pensions industry when it initially reacted to the 5 per cent. figure. I could go into the matter, but it was debated at considerable length in Committee last year.
The criticisms that were initially levelled at the 5 per cent. figure now seem to have abated and the anxiety expressed about it receded when the full details of the new rules were made clear. However, if at some point in the future it became necessary to revise the 5 per cent. figure, we would amend the regulations, which I assure my hon. Friend is the more technically appropriate way to set about the matter. But we have not reached that point and, for the reasons that I have hinted at, I do not think that we are about to in the foreseeable future.

Sir Brandon Rhys Williams: With the leave of the House, I should like to comment briefly on what my right hon. Friend the Financial Secretary has said.
This short debate has been useful, in that it has brought a statement from the Front Bench on this subject, which I know is regarded as controversial, certainly by some schemes, if not by all. I recognise that if the assets are

valued on the same basis as the liabilities, the margin of 5 per cent. is very likely to prove acceptable in many cases, but it is possible to feel some anxiety that circumstances might change. I think that the House will have been interested to hear my right hon. Friend say that the figure of the excess of 5 per cent. might also be modified with the passage of time and in the light of experience. That was a helpful clarification of a concession that we did not appreciate that we had had before.
The situation that it is not impossible to imagine is one in which wages rise faster than productivity. In final salary schemes, that would place higher obligations on the pension trusts than they might have anticipated, although it would also produce higher contributions than they might have anticipated. If wages rise faster than productivity, it seems inevitable that the real profits of the investments will fall and the assets of the pension trusts may not respond as the trustees hoped. There may be smaller dividends because the money is flowing out to the wage earners which they hoped would flow out to the investors, or there may be less capital growth because of various factors, when people do not put the same stock exchange valuation on assets because the dividends are proving to be somewhat disappointing. If that was so, a 5 per cent. margin might prove to have been inadequate and a refund to the sponsoring employer might prove to have been a most mistaken decision on the part of the trustees.
My right hon. Friend the Minister explained that in those trusts the beneficiaries do not have a direct claim on the fund, as I understand it. I regard that as in urgent need of change. That is why I place emphasis on the identification of the employees' assets and on the clarification of the duties of pension fund trustees, even where the pension fund has not been set up formally under a trust. The administrators or managers of these schemes, and the insurance companies that operate them, should recognise that they have the status of trustees, and that the money has been put in their hands for the beneficiaries and not to be refunded from time to time to the employers.
The circumstances in which the trustees are entitled to refund the money to the employer seem very unusual, and there should be far more pressure on the funds that have large sums at their disposal—possibly well in excess of their apparent liabilities—to find ways to distribute that money to the beneficiaries. If all occupational pension schemes accepted it as a liability to uprate fully with the RPI as public sector schemes do, in many cases they would prove not to be so fully funded as they think. There are plenty of other ways in which they could treat their beneficiaries more generously if they have funds to dispose of in trust for the beneficiaries that are not specifically allocated to meet their clear obligations. Nevertheless, as my right hon. Friend is aware that 5 per cent. may prove, with the passage of time, not to be a sufficiently generous figure, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Order for Third Reading read.

Mr. Norman Lamont: I beg to move, That the Bill be now read the Third time.
When a Bill is committed to a Standing Committee, it is customary to thank hon. Members at the end of the proceedings. However, as the Bill was discussed in Committee on the Floor of the House, it was not possible
stop

to pay tribute to hon. Members at the end of the Committee stage. Had it been possible, I should have liked to pay tribute to two hon. Members. First, of course, I thank my hon. Friend the Member for Kensington (Sir B. Rhys Williams) who has advanced his views on pensions with remarkable resourcefulness and lucidity. We have all become well educated on pensions as a result. I only hope that my hon. Friend is not too despairing and truly believes in the Jericho principle that he enunciated on Second Reading.
The second hon. Member to whom, in the best nonpartisan way, a tribute should be paid is the hon. Member for Sedgefield (Mr. Blair) who has handled over 100 clauses absolutely on his own. All hon. Members who have listened to the debates will agree that he has done remarkably well. Now that the Opposition reshuffle has taken place, I am extremely sad that we are not able to welcome the shadow finance team here, because I wanted to point out that it has increased its numbers. For the first time, a shadow team outnumbers the real team; there are six shadow Ministers, compared with five real ones. There are only two explanations for that. One is that my right hon. Friend the Chancellor of the Exchequer is the Gary Lineker of politics: he has to be marked by three men at once. The alternative version, which the Opposition may prefer, is that the hon. Member for Sedgefield has done such sterling work in Committee that they cannot find two people up to doing the work that he has done so well. The hon. Gentleman may choose the interpretation that he prefers.
I must say something about the pension provisions because they are the largest group of clauses in the Bill. They contain important and far-reaching changes. Much has been done to widen the choice of pensions. Many employers have established occupational schemes for their staff with the help, as my hon. Friend the Member for Kensington has emphasised, of generous tax reliefs. At present, more than 10 million people are members of such schemes, but there was clearly considerable scope for more to be done. Some 10 million employees are still not in occupational schemes and make no private provision for retirement. A central feature of our strategy is to bring private pensions within the reach of those employees, for two reasons: first, to provide them with a pension of their own, and, secondly, to increase their independence.
The new personal pensions will be available to all employees who are not in an occupational scheme, to the minority of employees who choose to opt out of their occupational scheme and to the self-employed. These schemes will be available from next January. The legislation is based on the present, broadly similar, retirement annuities provisions but, in addition to being brought up to date, the new measures incorporate a number of new features that have been widely welcomed. The Social Security Act 1986 enables employees to contract out of the additional component of the state scheme through a personal pension. The Finance Bill provides the necessary tax procedures to achieve that. Everyone will agree that these are important proposals, and my hon. Friend the Member for Kensington, who has been frank in some of his criticisms of the pensions regime, was kind enough to describe them as "inspired and imaginative." I hope that he will not mind my reminding him that those were his words.
In addition, the Bill enables a much wider range of pension providers to establish personal pension schemes. As well as insurance companies and friendly societies, the field will be open to banks, building societies and unit trusts. The Bill also contains provision to allow members of occupational schemes to make additional voluntary contributions to a pension plan that is completely separate from their employer's scheme, up to the tax approval limits on contributions and benefits. That, too, has been widely welcomed as something that will increase the choice of providing for retirement.
A number of hon. Members expressed concern about two aspects of the AVC proposals. First, they argued that benefits should not, as we propose, lose the right to be commuted. I am afraid that the Government do not accept that, because the tax reliefs for AVCs are intended to assist provision for additional pension benefits. Secondly, it was argued that the present benefit limits should not apply to free-standing AVCs which, it was suggested, were analogous to personal pensions. Again, I had to disagree with some of my hon. Friends and made clear my view that AVCs—whether in-house or free-standing—are not only personal pensions under another name. They provide benefits that supplement those available to someone in an occupational scheme. Therefore, I cannot accept that the benefit limits should not apply; nor do I believe that the necessary monitoring arrangements that the Revenue will be working out in consultation with the industry will make free-standing AVCs unworkable.
A further purpose of our reforms is to remove as far as possible the pensions obstacles to job mobility. My hon. Friend has emphasised time and again the problem of the early leaver. There is no quick and easy solution to that, but the new pensions opportunities which have been brought forward and which I have described will greatly reduce some of the worst aspects of this problem. I hope that my hon. Friend will at least agree with that. The improvements that we propose can be justified only if the tax reliefs for pensions are not abused. We have felt it necessary to impose some limited restrictions to guard against misuse of the tax reliefs, particularly by a small number of very high earners. The tax rules for pensions were never intended merely as a tax shelter for investment generally, with scope for postponement and, when it comes to lump sums, complete elimination of a tax liability. These restrictions will have no impact on the vast majority of pension scheme members. For ordinary working people, the opportunity for abuse has never been available.
During the debates in Committee, a number of hon. Members suggested that some aspects of the proposals — in particular, the rules on accelerated accrual of pensions—would restrict job mobility. My hon. Friend the Member for Slough (Mr. Watts) was extremely concerned about that. I am still not persuaded that any change in our proposals is justified, but I can assure my hon. Friend and the House that we shall keep the position under review, and if the rules appear to have a wider and more adverse impact on job mobility than I expect, we shall urgently consider the case for modifying them. I hope that my hon. Friend the Member for Slough will note that.
I could not leave the subject of pensions without again referring to what my hon. Friend the Member for Kensington has said about final salary schemes, although in the debate on new clause 1 we covered that ground fairly


well. My hon. Friend is right that the question of early leavers still poses problems that we need to address in certain ways.

Mr. John Redwood: Does my right hon. Friend agree that if in some future legislation we manage to move nearer to money purchase in the way described by my hon. Friend the Member for Kensington (Sir B. Rhys Williams) we would solve the problem of early leavers and the whole point of those amendments was to improve job mobility?

Mr. Lamont: My hon. Friend the Member for Wokingham (Mr. Redwood) is absolutely right. I hope that in the proposals we have brought forward in this Finance Bill we have taken a modest step in that direction. As my hon. Friend said, those arguments will disappear the more we go down that road. It is to some extent a question of people's choices under the new types of pensions that are now available.
The hon. Member for Sedgefield asked whether the personal pension legislation in clause 21(2), which concerns the waiver of premium options, represents a change from the present law. The answer is no. Such an option allows premiums payable under a contract to be waived if a person cannot afford to pay them because of illness. That is possible for retirement annuities now, but does not have to be expressly legislated for. Personal pensions legislation, however, is structured in a different way.
My hon. Friend the Member for Ryedale (Mr. Greenway) asked, in regard to clause 22, whether the new earlier retirement age of 50 may be applied between now and 4 January to existing retirement annuities. I am afraid that the answer is no. The present retirement annuity rules are not being changed, but there will be no objection to the amendment of existing retirement annuity contracts after 4 January so that they will be capable of approval under the new personal pension legislation.
My hon. Friend the Member for Ryedale was also concerned about the administrative arrangements for dealing with excessive personal pension contributions. Those and other aspects of the administration of personal pension schemes will he discussed fully with the pensions industry. It is hoped that a discussion document will be circulated to interested parties by the end of the month.
In addition to the debates about pensions, we had two important debates on retrospection. The first was in the context of United Kingdom members of foreign partnerships in clause 62, and the second was in the context of roll-over relief for gains on oil licences in clause 80. I understand completely why the House and the Committee were concerned and anxious to examine those matters closely. Hon. Members will recall that in both those clauses the Government recommended retrospective legislation to restore the general understanding of the law following unexpected decisions in the courts. The general understanding of the law prior to those decisions in the first case was that United Kingdom resident partners of foreign partnerships are liable to United Kingdom tax like all other United Kingdom residents, and in the second case that roll-over relief is not available for gains on oil licences.
Right hon. and hon. Members will recall that I said that such retrospection has caused the Government very deep concern, and we had not come to the decision easily. We had to give greater weight to the interests of the majority

of taxpayers than to a limited class of taxpayer. In both cases we were introducing legislation which, while restoring the general understanding of the law, was also preventing third parties from suddenly deriving a windfall benefit from the decisions of the courts for six years back.
The provisions in clause 70 on Lloyd's reinsurance to close are an important part of the Bill. The original proposals caused hon. Members considerable worry and perhaps I should remind the House why legislation was necessary.
As matters stand, the Revenue does not have an effective locus for examining claims for tax deductions in respect of reinsurance to close premiums and, where necessary, making adjustments for tax purposes If nothing were done, Lloyd's underwriters would be in the unique position of being able to determine the amount of a tax deduction without effective review by an inspector of taxes.
There must be an effective system for ensuring that reinsurance to close premiums can be properly scrutinised for tax purposes. That is both right in principle and necessary to ensure fairness to other taxpayers whose claims for tax deductions have to satisfy examination by the Revenue.
However, the system must also be fair to Lloyd's and take account of its special features. We recognised that fact from the outset and when my right hon. Friend the Chancellor of the Exchequer announced the proposals in his Budget speech he said that there would be immediate consultations with Lloyd's on the details of the legislation. Those discussions have been extensive and thorough and we have carefully considered Lloyd's representations.
Quite properly, Lloyd's has recognised throughout the discussions that there needs to be a proper system for ensuring that tax deductions for reinsurance to close are not excessive, but it was worried about the original wording, which treated reinsurance to close as a provision. In particular, it objected to the principle of equating reinsurance to close premiums paid by one syndicate of Lloyd's underwriters to another with the provisions for outstanding liabilities made by insurance companies. Lloyd's feared that if those criteria were applied to it there would be excessive disallowances of claims for tax deduction, which might consequently damage Lloyd's commercial position.
The revised clause in the Bill, with the amendments made in Committee, meet Lloyd's anxieties about the original proposals. The chairman of Lloyd's has told his members that the Lloyd's council considers that the legislation should prove to be "workable and acceptable".
Instead of equating reinsurance to close with insurance company provisions, the Bill now provides a free-standing test for the tax deductibility of reinsurance to close. The test is that the figure must be a fair and reasonable value of the liabilities, designed to produce neither a profit nor a loss for the underwriters who assume the outstanding liabilities. So reinsurance to close will be tax deductible in full if — but only if — the figure can be justified by adequate evidence.
I think that it is fair to say that clause 70 is a satisfactory outcome of the consultation with Lloyd's. It meets the twin objectives of giving the Revenue an effective locus, which it must have, and being fair to Lloyd's members. In future, the amount of reinsurance to close can be properly scrutinised by the tax inspector to ensure that tax deductions are not excessive. At the same time, the


proposal takes full account of the unique characteristics of Lloyd's and reinsurance to close, which I accept cannot be equated with provisions made by insurance companies.
I referred earlier to the oil industry provisions in clause 80. Clause 101 contains a series of amendments to the oil taxation provisions in the Finance Act 1987, mainly affecting the petroleum revenue tax "nomination scheme", which we introduced in section 61 and schedule 10 of that Act. Many of the amendments are directed at detailed difficulties that emerged during the continuing discussion with the industry of the provisions in the 1987 Act and are designed to make life simpler for the taxpayers who are affected.
Rather than leave the amendments over until the spring Bill, we felt that oil companies, which will soon be making their first returns under the nomination scheme, would find it helpful if we proposed the necessary legislation now. In addition to these detailed changes, clause 101 and schedule 8 introduce a measure to counter certain practices that could be used to circumvent the nomination scheme. Unlike the nomination scheme itself, this will not take effect at once. It will be on the statute book only to be triggered by Treasury order should evidence of abuse arise.
One cannot avoid mentioning the changes in inheritance tax legislation. We have liberalised inheritance tax in that we have allowed transfers to interest-in-possession trusts to count as potentially exempt transfers, provided that they meet the normal qualifying conditions of potentially exempt transfers. This measure will help businesses that are often held in interest-in-possession trusts. It will also help our heritage when many of our great houses and works of art are held in interest-in-possession trusts. I again make it clear that, although we have given this exemption for transfers into interest-in-possession trusts, we intend to draw the line there and do not intend to extend this to other forms of trust such as discretionary trusts.
We had some discussions about acceptance of property in lieu of tax and the Bill now contains some important alterations about the way in which interest is calculated. The donor of the property or the painting can now calculate the interest either to the point at which the item is offered instead of tax or to the point at which it is accepted — depending on which is more advantageous from the point of view of the taxpayer. We hope that this will encourage more of our heritage to remain in Britain. Hon. Members may recall that under these arrangements we were enabled to acquire Constable's "Stratford Mill". We hope that the new optional arrangements will provide further encouragement for the continued use of the facility.
I should also mention the provisions on stamp duty. Clauses 99 and 100 are stamp duty clauses and correct anomalies which would otherwise inhibit the smooth working of the securities market. Clause 99 makes minor amendments to section 50 of the Finance Act 1987. Section 50 extended the stamp duty exemptions for gilt-edged securities to options to acquire such stock, such as "call options". Clause 99 extends the scope of section 50 exemption options to "put options" as well.
Clause 100 deals with two problems that have been encountered following the introduction of the reserve tax when shares have been sold to the public on the occasion of a listing. The clause removes charges to the reserve tax

that occur when an issuing house stands as principal between the company and the vendor shareholders on the one hand and the public on the other. It also removes the double charge to stamp duty and the reserve tax that can arise in certain circumstances when a member of the public receives initially a renounceable document of title. The clause will enable the new issues market to operate more smoothly to the benefit of companies bringing their shares to the market and also to new investors.

Mr. Tim Smith: Has my right hon. Friend noticed that, since the rate of stamp duty was substantially cut, the yield from stamp duty from stock exchange transactions has risen? Does he think that there is any connection between those two things and, if so, what lessons should we draw?

Mr. Lamont: My hon. Friend makes an extremely interesting point. [Interruption.] That sedentary interrup-tion is wrong. I know the answer all too well. If the House wishes we can debate for a considerable time the increased revenue that results from many areas when we cut taxes. That is a lesson that the Opposition have yet to learn and it is why so much of their argument that one can only afford more public services by increasing taxes is wrong. We can sometimes get better public services by cutting taxes.
Lastly, I should like to speak about what is perhaps the most important part of the Bill, the part which is undoubtedly a considerable innovation — profit-related pay. I am sorry that the Opposition persist in the view that the purpose of profit-related pay is to produce a low-wage economy. That is quite wrong. The purpose of profit-related pay is to produce pay that is affordable. Such pay has been wanted and pursued by Chancellors of the Exchequer in both Conservative and Labour Governments. It is very different from saying that we want a low-wage economy.
If we can have pay that is affordable, in the long run we shall have high wages and a prosperous economy. The new relief for profit-related pay is only one of several measures produced by the Government to encourage flexibility and to help create jobs by improving the supply performance of the economy. Profit-related pay means flexible pay. That means flexible upwards as well as downwards, in line with the commercial success of a business. Anyone who thinks that this necessarily means lower pay takes a much more pessimistic view of our business prospects than I or the markets do. We all want to see business success and higher remuneration and the Government are pursuing policies to those ends.
One could make the point that industrial production is at its highest ever level. Since 1979 we have seen dramatic growth in productivity and in profits. The idea of linking employees' pay to the commercial success of their business does not inevitably imply lower remuneration; quite the contrary. I make no apology for a measure that will encourage flexible pay. That is the direction in which we need to move, because although Britain's economy is making progress that would have seemed unbelievable 10 years ago, it is still hampered by rigidities and inefficiencies in its markets. That applies most of all to the labour market and to its pay system.
We have seen record falls in unemployment but we need more jobs and PRP can help here. Of course it is not a panacea, but I firmly believe that, if there were more profit-related pay schemes covering a significant part of


the earnings of a large number of employees, that in itself would be a major step down the road on which we have set out towards higher output, productivity and employment. The hon. Member for Sedgefield said that he and his party opposed the general principle of profit-related pay. Presumably that means that they believe in pay that is not related to profits. I wonder where they think that the money to pay employees comes from.

Mr. Blair: I do not think that I ever said that I am against the principle of profit-related pay. I said that people were perfectly free to enter into profit-related pay bargains if they wanted to. What I am against is this provision which builds in an incentive for a specific type of incentive-based pay. That is altogether a different proposition.

Mr. Lamont: I am grateful to the hon. Gentleman for making that clear. Certainly some of his hon. Friends have shown opposition to the concept. They do not like the idea of pay being related to what is affordable by a company. I am glad that the hon. Gentleman departs from them on that.
The clauses that provide tax relief are designed to encourage the spread of PRP schemes. The same principle underlay the income tax relief for share schemes which were introduced in 1978 which we have turned into a great success. In the year to June 1987, a further 210 all-employee share schemes were approved under the legislation, as improved since 1978, bringing the total to over 1,300. If Opposition Members had at that time shown the same miserliness with tax relief as they now show to the clauses that encourage the spread of PRP schemes, I wonder whether we would ever have had the success that we have seen with share schemes. Profit-related pay complements the various existing share schemes, and those who support income tax relief for one should support it for the other.
The details of the proposed tax relief have been criticised for their complexity, and I would be the first to agree that the clauses have a complex appearance in parts, but that does not mean that a PRP scheme registered in accordance with this legislation would have to be complex. It could be simple and easy for employees to understand. We have gone to great lengths to allow employers to be able to choose from a great range of options what form their simple schemes should take. It is this freedom and flexibility that gives the Bill the appearance of complexity.
The Inland Revenue will be issuing guidance notes in September to assist employers. It is an encouraging sign of the widespread interest that our proposals have attracted that already over 21,000 employers have asked in advance for copies of that guidance, and in that number are 120 of the top 250 companies. I hope that they will turn their interest into action without delay. They will need to be thinking now about how to construct a scheme if they are to he registered to operate tax relief on it in time for the next profit year. Some will prefer to negotiate introduction next year and begin the tax relief in the year afterwards. Our costings anticipate a gradual take-up but I shall clarify that. A high take-up in 1988–89 would not produce the full annual cost in that year. Our estimate of a £50 million cost in 1988–89 could thus be consistent with over 1 million employees being covered by registered schemes in that year, which would produce higher costs in later years. I am sure that take-up will grow over time.
As tax relief could be very valuable — up to the equivalent of 4p off the basic rate to a man on average earnings—it will have a significant cost. I am not sure that it will ever cost £1 billion a year, which was the figure produced at one stage in the debate on the assumption that practically everyone who could be eligible will be covered by a registered scheme. A figure of several hundreds of millions a year is not unlikely, however, if the initiative has wide appeal. If it were to cover every potentially eligible employee, however, no one would be happier than the Government. That would indicate a radical change for the better and would ease our labour markets, which is something which we need very much to do. This would be a worthwhile return to the taxpayer.
The hon. Member for Sedgefield has said repeatedly that he could find better things to do with such large amounts of money. I think that we know what Opposition Members mean when they talk about better things that they would do with the money. There is probably no need to enlarge on that. They are extremely good at finding ways of spending large sums, sums larger by far than what is at stake with the proposed tax relief, and they would be able quickly to spend them. The difference is that the proposed tax relief will be a constructive contribution to making the economy work better. It will be a way of getting us away from the rigidities that have bedevilled our performance in the past. That is why it is essential that the House should support it as a way of helping businesses to do better. It will help employees to earn higher living standards and help our economy to grow and prosper in response to the challenges of competitive world markets.
In successive Budgets, the Government have held steady to the objectives of cutting taxes and simplifying the tax system to reduce distortion and lighten the administrative burden. Tax reform and reduction is a vital part of our overall strategy. We want to see a society in which enterprise is rewarded and where individuals are allowed to keep more of their money to spend or save as they wish. We want to provide greater incentives for individuals and their families. The pre-election legislation implemented vital measures to enable us to pursue these objectives. Overall, taxes were reduced by over £2·6 billion, the basic rate was cut by two percentage points to 27 per cent., inheritance tax was reformed and there was a package of measures to reduce the burden of VAT on small businesses.
The record is clear. Personal tax rates have been reduced and we have introduced reforms in business taxation that are being copied in other parts of the world. We have a system of business taxation that rightly rewards enterprise by allowing companies to retain more of the profits that they have made to spend as they wish, rather than the old self-defeating system that gave tax subsidies to encourage investment but taxed away the incentive to invest properly.
The Bill continues the process of reform and imaginative proposals, especially those relating to pensions and profit-related pay, which I predict will bring about significant change.
I commend the Bill to the House.

Mr. Tony Blair: First, I thank the Financial Secretary to the Treasury for his kind remarks, his courtesy, his good will throughout the course of our consideration of the Bill. and for what was the most


detailed explanation that I have ever heard on the Third Reading of a Finance Bill. I welcome the two Ministers who have participated in the proceedings of the Finance Bill for the first time, the Economic Secretary—it is a pleasure to welcome him to our deliberations—and the Chief Secretary, who spoke on Second Reading. Since Second Reading, the Chief Secretary has stayed in the background — no doubt he has been preoccupied in trying to square the Government's pre-election promises with the realities of public expenditure.
I wish to join in the praise of the hon. Member for Kensington (Sir B. Rhys Williams), whose knowledge of pensions brought expertise to our debates. To make an understatement, that expertise is not always present. The hon. Gentleman must have thought that Heaven had arrived on earth when, after years of containment no doubt by the Government Whips, he was given licence to advance a pretty well unlimited expansion of his arguments this afternoon. We are grateful to the hon. Gentleman for his contributions to our debates. If I may say so, it is greatly to his credit that he made a detailed speech in moving new clause 1 and was never once in danger of straying outwith the bounds of order. When he dies, I think that "transferability" will be found written on his heart.
I shall confine myself carefully to the contents of the Bill. It is the rump of a previous measure but it contains two especially important measures, those on profit-related pay and pensions. Though not necessarily headline-catching, these are measures that could be extremely far-reaching in their effect. On pensions, many of the measures flowed from the Social Security Act 1986, but this Bill included provisions on lump sum payments and the right to make additional voluntary contributions.
I wish to expresss one note of hesitation about the pensions legislation. The benefits of personal pension schemes are now considerable, especially in terms of accelerated rights of accrual. I hope that occupational pension schemes are able to keep up with personal schemes and that they will not become second-class schemes for those who cannot put together a decent personal pension scheme. The benefits of both need to be understood clearly and explained.
The Opposition found themselves unconvinced about profit-related pay and the claims that it would lead to lower unemployment and have beneficial effects on the relationship between workers and management of a sort that other incentive-based schemes have lacked. I do not say that profit-related pay is bad, and that is not the issue that we have to consider. We have to decide whether it was right to introduce this form of fiscal incentive to encourage PRP. The dilemma is that if the eventual costs of PRP are small because it has been little used, it will have failed because PRP, if it is to have any impact on the broader economy, must be widely used.
If profit-related pay succeeds in catching on and becomes expensive, the extravagant claims made for it will be subject to even greater scrutiny. If its costs run to hundreds of millions of pounds, as is possible — the Financial Secretary did not hotly dispute this—and its benefits prove to be vague or even illusory, we shall have made a very expensive mistake. Opposition Members felt that we could not support it for that reason.

Mr. Tony Marlow: The hon. Gentleman seems to be worried about the scheme suggested in the Bill being a success. If it is a success because companies make a lot of profits and therefore people pay less tax, because they are in the scheme for profit-related pay, is it not the case that as the company itself makes more profit it will be paying more tax so the cost of the scheme would be counterbalanced by the additional income from the company?

Mr. Blair: Obviously, that is the hope expressed by the proponents of this scheme. However, the argument that profit-related pay will help to reduce unemployment rests on a case posited at a time of recession. It is argued that in a recession there will be less incentive to sack workers but the profits will be reduced. I am not saying that profit-related pay is about cutting wages but rather that the case for profit-related pay, as against other incentive schemes, has not been made out.
The scheme may succeed in the sense that many people use it, but it will succeed in justifying the claims made for it only if it has a favourable impact on the broader economy.
We have also discussed various minor matters, such as the corporation tax changes which allow for automatic penalties. Those introduced some of the matters recommended by the Keith committee. I repeat the warning that, without a power of mitigation, the penalties could work great injustice, and in value added tax terms they have certainly done so.
The Government have changed their mind on at least three matters. They changed their mind on the treatment of the reinsurance to close premium in relation to Lloyd's in clause 70 and on the life assurance companies, where the treatment of capital gains on policies is to remain the same pending a review of the whole question of the tax treatment of life assurance companies. The Government changed their mind, too, on clause 80 and the taxation of oil companies in relation to roll-over relief in the farming out of licences. On that, the Minister agreed to consider some form of relief at the exploration phase when no profit is made.
Clauses 62 and 80 introduce retrospective legislation. The first concerns partnerships resident abroad and the second deals with roll-over relief for oil licences. We were right to draw attention to those two clauses on the basis of retrospection alone and to restate, as a matter of general principle, the fact that we dislike and distrust retrospective legislation, except in very special circumstances. There was a measure of common agreement that retrospection should be permitted only when it restored a general understanding of the law and when the tax loss resulting from the anomaly is very substantial.
During our debates, I was never convinced of the wisdom of the way in which the Government have proceeded in these clauses. When a tax case is taken to the commissioners or to appeal, the taxpayer wins and the Revenue introduces legislation to close the loophole, the legislation usually provides—and does so in the clauses — for the original taxpayer to be put into a unique category and thus secure the benefits resulting from his appeal. That is a very strange state of affairs, especially when many other cases may have been hanging fire pending the outcome of the original case.
The Finance Bill contains 104 clauses and nine schedules. Given that I have served on three Finance Bill


Committees and that I am now moving on to other things, perhaps I may be permitted a moment of reflection. There are two enduring characteristics of Finance Bills. First, much of what they contain is highly technical, although non-controversial. When complexity is combined with lack of controversy in specialised matters such as taxation, there is a strong case for consideration by a Committee specifically formed to examine such matters. A Front Bencher, or indeed a Back Bencher — particularly in Opposition—will find that most of his time is devoted to understanding the legislation, let alone interpreting it or amending it sensibly.
Secondly, many of the clauses affect taxation of certain sectors or interests in a limited but profound way. The Government found with the clauses dealing with Lloyd's and life assurance companies that they benefited from a period of consultation. That period was forced upon them by the general election. However, in many cases the advantage of surprise on Budget day is negligible compared with the highly significant disadvantage of introducing measures without adequate consultation with those most closely affected.
At its best, this Bill is a typical Conservative measure. The Government are caring to a fault in considering the tax efficiency of foreign-controlled companies. They are painstaking in their study of detail when debating the future of inheritance tax, interests in possession or the plight of the wealthy. They welcome with open arms the slightest representation from Lloyd's. However, when it comes to hearing the voice of the under-privileged, the pleas for help of the unemployed or the cry for action on behalf of the 10 million or so people who are living below the poverty line, the Government fall strangely deaf. Their attitude becomes dismissive and their purse stays tight shut.
It is for that reason above all others—not because of the minutiae of the Finance Bill but because it affects the nature of our society — that we shall oppose the Bill tonight.

Mr. Andrew Mitchell: I rise to address the House for the first time in a spirit of great humility—deeply honoured to represent my constituency in this place.
I am particularly pleased to have caught your eye relatively early in the Session, Madam Deputy Speaker, so that I may pay tribute to my predecessor, Sir Philip Holland. Philip's love and knowledge of this place and his service to his constituency was well known and well respected—as much in Gedling as in this House.
I mean no disrespect to Acton when I say that Philip graduated from that seat, from 1959 to 1964, to Carlton, which he went on to represent for 21 years—latterly as the constituency of Gedling, following the Boundary Commission's most recent review.
Any hon. Member who chairs the Committee of Selection and yet remains so well liked and respected by hon. Members on both sides of the House must be endowed with the greatest of skills. Only time will tell whether any of my hon. Friends will take up Sir Philip's mantle as a great hunter of quangos. I have been left in no doubt over the past few weeks that Philip's many friends on both sides of the House will join me in wishing him and Lady Jo Holland a long and happy retirement.
The House may be aware that I am not the first member of my family to have taken his seat in this House; indeed, I am at least the fourth to have done so. Nevertheless, over the past three weeks I have come to the confident conclusion that not since Lloyd George have so many people known my father.
I beg to suggest that the constituency of Gedling is insufficiently well known outside Nottinghamshire. The rural deanery of Gedling, which gave its name to the refashioned seat of Carlton in 1983, is far more compact than its predecessor, having lost all the land south of the River Trent. My constituency stands at the crossroads of England, with a foot in the north, a foot in the south, but its heart in the Midlands.
Many hon. Members wax lyrical about the rural or urban nature of their constituencies and their agricultural or commercial interests. The great delight and at traction of the Gedling constituency lies in the exciting cross-section of the great variety of our national life that it provides. From the rural beauty and farming lands at the northern end to the more industrial areas of Netherfield and Colwick, my constituency includes the prime residential areas of Carlton, Woodthorpe and Arnold, perched either side of a hilly ridge. It also contains the attractive villages of Gedling, Burton Joyce and Stoke Bardolph, which include two of the most beautiful churches in the country which date from Saxon times. The Gedling colliery is achieving record productivity. It has been recruiting new members to the industry over the past six months and is an important feature of my constituency.
The quality of life enjoyed by my constituents is, by and large, excellent. We are particularly well served by the fine health facilities in Nottinghamshire which have seen a 30 per cent. decrease in waiting lists over the past four years. My constituents profit from living under the benign sway of the Gedling borough council, which is continuously singled out for praise by the Audit Commission for its standards of efficiency and service provision. Indeed, the council had its own version of the right to buy before the Government introduced their Housing Bill in 1980. We receive national and international delegations to inspect our housing schemes for the elderly and the frail elderly.
Of great significance is the fact that Gedling lies alongside the city of Nottingham. We know only too well that what happens in Nottingham today affects us in Gedling tomorrow. Gedling's wealth and success are inextricably linked to the future of Nottingham city. As I try to follow that rocky pathway which is the lot of a Government Back Bencher, travelling as it does between toadyism and revolt, I shall be hoping, Madam Deputy Speaker, to catch your eye in the future when the Government's bold plans to tackle the problems of our inner city come under discussion. We have much to be proud of in Gedling, and I am pleased to have been able to tell the House briefly some of those things.
Many of my constituents have followed the passage of this Bill with keen interest. The measures which passed into law before the election were widely welcomed. The help for business in dealing with VAT and in reducing small companies' corporation tax was warmly supported, as was the further help for the blind and the elderly. Above all, we have had the welcome reduction in income tax. Today we are asked to give a Third Reading to this Bill. the greater part of which reintroduces proposals for tax relief for profit-related pay, as well as extending the


accessibility and flexibility of personal pension schemes. I warmly welcome both measures. As my right hon. Friend the Chief Secretary said on Second Reading:
The working of the labour market remains one of the greatest weaknesses in this country." —[Official Report, 8 July 1987; Vol. 119, c. 356.]
There is common cause on both sides of the House that the level of unemployment remains appallingly high.
I hope that I am being equally uncontroversial when I say that it is the supply side of our economy that must particularly command our attention and the Bill, with these two principal measures, makes a direct contribution on that front. In spite of significant progress on the supply side, there remain real restrictions on job mobility, occasioned by the lack of private rented accommodation and immobility within the council housing system.
The problems within education and training are well rehearsed, but the results are that we do not always turn out children equipped to compete in today's industries or win tomorrow's jobs. There are still problems within the labour market which hinder productivity along with our industrial performance. Above all, there is the absurdity of a system whose rigidities can attribute greater value to being unemployed than to working.
Tax relief for profit-related pay will ecourage the widespread adoption of such schemes and will help to dispel any vestige of that bizarre myth which was prevalent during the days of our economic decline in some parts of the private sector —that pay is somehow not in reality always directly linked to profitability.
These measures will help further to eradicate the them-and-us sentiments which for so long have dogged British industry. They will extend and enhance a community of interest between employee, employer and shareholder and secure a more motivated and committed work force. Above all, who can doubt that such measures, when implemented, will act to cut unemployment by ensuring less risk for an employer contemplating taking on labour as well as acting as an alternative to redundancy when times are bad?
I believe that the clauses which relate to private pensions will secure an equally warm welcome. They improve the lot of the early leaver, and perhaps I should declare an interest at this point. It is a sad fact that many who have changed careers during their working life are particularly disadvantaged in respect of their pension entitlements. The relevant clauses in the Bill will not only increase the freedom to choose in pension planning but free another rigidity in the labour market over the long term.
The Bill's provisions join the many other economic measures taken by the Government to improve choice and freedom for millions of our fellow citizens. Such measures also extend personal responsibility greatly within society. It is the extent to which these opportunities and responsibilities have been grasped throughout society which is truly remarkable. Many of these measures have been practical methods to improve the commercial operation of our economy, but they are part of a shift in opinions and ideas, and expression of a new consensus which has sprung up. They mark a sea change in public opinion. It may be that the Falklands factor disguised the extent of support for this new reality, but the 1987 third election victory is a message which cannot be ignored on

the Opposition Benches. Indeed, the right hon. Member for Plymouth, Devonport (Dr. Owen) acknowledges these truths in his books and in his more recent speech in the debate on the Loyal Address. I dare to suggest that even the hon. Member for Dagenham (Mr. Gould) has shown an awareness of these new realities and aspirations over the past few weeks.
It was a Conservative Prime Minister returning to office in 1951 who reflected in the House that the nation required time to allow certain Socialist legislation to reach its full fruition. Although the positions are not comparable, I hope that the Opposition will accept how great has been the revolution in the spread of choice and ownership within society as well as in personal responsibilities keenly grasped. It is time for the Opposition to embrace these verities.

Mr. Andrew Smith: I, too, am rising for the first time to speak in the House and I should like first to congratulate the hon. Member for Gedling (Mr. Mitchell) on his speech, which I found eloquent and confident and which taught me a great deal about his constituency. It is a double pleasure to congratulate him because, last week, I had the misfortune to lose my identity pass and the hon. Member was, first, observant enough to find it and, secondly, kind enough to return it to me personally.
It is an honour to have been elected to represent the people of Oxford, East. I sincerely thank them for the privilege that they have afforded me. That Labour gained the seat with an increase in our vote of more than 20 per cent. on 1983 is a real tribute to the Labour party members and supporters in our constituency and beyond who worked hard and long to secure victory. It is a tribute, too, to the standing which Labour has built up in our community over the years. The result was proof that Labour can win new seats in southern England. I am sure that it will be followed by other similar southern successes in the next election.
It is not as though my predecessor, Steve Norris, and the local Conservative association were any pushover. Indeed. I should like to express the thanks of the constituency, as I did on election night, for his service, especially his assiduous work on behalf of individual constituents. I thank him also for his stance on issues such as freedom of information and sanctions against apartheid. As many hon. Members will know, Steve Norris is a man of very considerable ability and persuasiveness. I do not want to damage his chances by saying this, but if the Conservative party has any sense, it will forgive his achievement in securing last year the title of The Guardian Back Bencher of the year and get him back in the House by finding bluer waters for him to swim in next time.
For those who do not know our constituency, Oxford, East is not the Oxford of "dreaming spires" or colleges but the Oxford of the people who built them, who work in them and who are rightly proud of the city's heritage, for it is their heritage—a heritage which also takes in the Oxford of motor manufacture, very fine hospitals and a polytechnic which is second to none. It is a compact and yet varied constituency in which the pride, the sense of community and the very diversity of the parts bring something greater to the whole.
I especially place on record my gratitude to the people of Blackbird Leys estate, where I live, for their invaluable advice and support over the years I have had the privilege of representing them on the city council.
I also record my personal appreciation of the contribution of the ethnic minorities to the community life of our constituency and pledge to continue here the work to eliminate the evils of racism whereby ethnic minorities are seen as a problem rather than as an opportunity for a genuine multi-cultural society based on equality, mutual respect, and full and fair opportunities for all.
Ours is a constituency which has escaped the very worst ravages of monetarism and recession. By present national standards, the Oxford area is a prosperous one; yet we have in our midst pockets of bad unemployment, serious poverty, one of the worst housing crises in Britain and shortages of funds for health and education that are drastically undermining services held in the highest regard by all in the area. Across our constituency, people of all backgrounds and political persuasion have come to demand and expect quality in public service provision that can only be secured by harnessing to the dedication of the work force adequate resources efficiently managed and applied in an economic and political environment that backs up their collective efforts and provides a democratic framework within which the individual and the family— not just a few of them, but every individual and family —can make the most of their lives. The Government's programme, the Finance Bill and the Budget that preceded it contain nothing to enable our people to do that. It is such a waste of the potential of my constituency, as it is of Britain as a whole.
I should like to make two comments and one suggestion about the fiscal incentives for profit-related pay in the Bill. My comments are, first, that if those provisions have any merit, which I think is doubtful, in any case there is nothing whatever in them for Austin Rover workers, local authority workers, hospital workers and the many others in Oxford, East working in the public sector, as clause 6 of the Bill specifically excludes them from the scheme and further relegates them to the status of second-class citizens. If there is benefit to be had, they lose out twice. They lose out by not being eligible and, to add insult to injury, they will be paying through their taxes for any benefits that others may enjoy.
My second comment is that, if we are to provide fiscal incentives for pay to be linked to profits, any sense of natural justice would require that this be conditional upon rights to information and, indeed, bargaining on the part of employees as to how those profits are determined. The absence of any such rights destroys any benign purpose that this part of the Bill may have had.
My suggestion is that if the Government are not merely engaged in a wage-cutting exercise, as the Financial Secretary said, if they are genuinely convinced of the merits of taxpayers subsidising linked pay and profits, they could best demonstrate their conviction by going the whole hog—by applying the thing the other way round and providing the same incentives for linking distributed profits to wage levels. We could have wage-related profits. That way, shareholders would benefit only where managements succeeded in getting wages up—a true harmony of interest, to my mind. However, I fear that that is not altogether what the Government have in mind.
Hon. Members on both sides in Committee referred to Austin Rover workers and others under the control of the

Crown being excluded from the profit-related pay provisions of the Bill. Even more disturbing was the response on behalf of the Government to the effect that this way was all okay because public sector activities would be covered when they were transferred to the private sector. This can only add to the anxieties that afflict the future of our car industry.
The Oxford area has seen 11,500 jobs in the car industry destroyed in the past 10 years. We have seen car workers wages' tumbling down the pay ladder not because of any lack of effort on the part of the work force; workers are working harder than ever before. It is not because of any resistance to new technology; some of the most advanced robotics in Britain are at Cowley. It is because the Government have signally failed to provide the market conditions for the success of the domestic car industry. Worse than that, they have heaped on top of the high exchange and high interest regimes that all but crippled the industry all the uncertainties about the future ownership of Austin Rover. Last year's Ford sell-off talks and the forced disclosure of commercial secrets to Ford dealt a body blow to the company at the very time when all the efforts of the work force and the completion of the new model range were starting to turn the company around.
I would hope to stay within the conventions on controversy in maiden speeches and have the support of Conservative Members when I say that the future of the car industry depends, first, on keeping Austin Rover in the ownership of the British people; secondly, on assuring investment for the models for the future; and, thirdly, on creating the market conditions in which the products the workers are so keen to produce can be sold. Long-term planning is needed to ensure the success of this key industry, not just for the sake of those directly employed and those in components manufacture who, together with dependants, total around 1 million people, but for the sake of the future of other key industries — steel, robotics, plastics, electronics and glass industries, all of which have a future linked closely to the success of our car industry.
There would be no clearer sign that Britain is the first undeveloping country than to further dismember and dispose of the only bits of the car industry in British hands. It would be a catastrophe not just for my constituency but for the country as a whole—a catastrophe of such an order that I sincerely hope that even the present Government will shrink from the prospect and instead now provide the support for the industry that its efforts and contribution to the economy so richly deserve. That way, our key manufacturing industries might generate profits for investment and profits from which workers can take a share. It is fair shares and fair opportunities for all that the Oxford, East voters and Labour Members are looking for. It is a tragedy and a great pity that those fair shares and those fair opportunities are not reflected in the Bill any more than they are in the Government's programme.

Mr. Tony Marlow: It is a great pleasure and a privilege to follow two such charming and eloquent maiden speeches. I am pleased to be able to do so. I say to my hon. Friend the Member for Gedling (Mr. Mitchell) that I hesitate to make remarks about chips off old blocks, but such was his eloquence and the content of his speech, of which we hope to hear many more in the future, that it may well be said before too long that father


is a chip off the new block. I was pleased to hear the remarks he made about his predecessor, Sir Philip Holland, who was well respected and loved by those of us here. He had the wonderful knack of making sure that one got on the Committees that one wanted to get on and that one did not get on to those that one did not want to get on.
I liked the caution about treading the narrow path between toadyism and revolt. I understand that Private Eve has a competition for what I think could be described in the Chamber as the excrement of the year. It may well be that at some stage Private Eye will set up a competition for the revolting toady of the year. I am quite confident that it will not be me or my hon. Friend.
The hon. Member for Oxford, East (Mr. Smith) also showed great promise for the future and we all enjoyed his speech. He made some kind remarks about his predecessor, Steve Norris. It is one of the sad and savage paradoxes, one of the harsh ironies of politics, that "the good die young", as it were. I am sure that we all agree that Steve Norris was one of the outstanding Members in the previous Conservative intake. He had great ability, personality and charm and, as the hon. Gentleman has said, great concern for the unfortunate. The hon. Gentleman suggested that if we were wise we should hope to see him back here again. We are indeed wise and we hope to see him back before long. The hon. Member for Oxford, East also referred to the importance of the motor industry and spoke with concern and affection about his constituency. Conservative Members, too, are deeply concerned about the fortunes of the motor industry and we are pleased that reports from Austin Rover are positive. We wish the hon. Gentleman and his constituents well.
This Finance Bill has been described as a hangover from the last Parliament—the controversial bits that we could not get through before the general election—but what was controversial then is perhaps less so now. Many of the controversialists before the election now sing a very different tune. The hon. Member for Oldham, West (Mr. Meacher) is convinced now that Conservative Finance Bills in the past few years have led to growth in the economy. The right hon. Member for Plymouth, Devonport (Dr. Owen), who is much respected among my colleagues, also believes that the economy is in good fettle. The perhaps less respected right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was filled with foreboding about the state of the economy, but having seen that his dire predictions are not to come to pass, he has removed himself from Treasury affairs and returned to where he was some four years ago.
Tunes have changed and from the Opposition's treatment of the Finance Bill in the past few days it seems that it is no longer a controversial hangover from the last Parliament. The hon. Member for Sedgefield (Mr. Blair) seemed almost to welcome many of the provisions. He was not sure whether this was the best way to do things, although he suggested no alternative, but he seemed to imply that many of the measures might have his support, if not today at least when they prove successful, as they surely will.
That has been the Government's history in the past eight years. They and their policies have been criticised, castigated and damned by the Opposition, but eventually

their measures have been seen, if not in Socialist eyes as the right measures, as effective and popular measures respected by the British people. Socialist candidates are learning what to say when they knock on the door of a person who has bought his council house, his car and shares in British Gas. There was a time when it was felt that we were all Socialists. I believe that now we are all becoming Conservatives.

Mr. Nicholas Soames: We all are Conservatives.

Mr. Marlow: My hon. Friend is certainly a robust follower of that persuasion.
This Finance Bill is one of a long line of Conservative Finance Bills which have regenerated and transformed the British economy. One loses count, but this must be about the seventh year of uninterrupted growth, with an average of 3 per cent., which is the fastest of any economy in western Europe. We used to be the sick man of Europe, but now we are the fit man of Europe. As a result of the Government's economic policy, manufacturing productivity has increased by a massive 43 per cent. since 1980 —again, a greater increase than in any other advanced industrial country. That magnificent achievement is in part due to Bills such as this, but the majority of the credit must go to the British people, who have grasped with both hands the opportunity presented to them.
The Opposition always seem to give statistics about manufacturing industry, choosing one little slice of the economy and comparing it with, from their point of view, favourable figures from some past time in history. Manufacturing industry, the extractive industries and the construction industries are all creating wealth—doing things, building things and making things— and when they are all added together one sees that there has been a massive increase in output since 1979. For some reason —I think that I know why—the Opposition choose only manufacturing industry.
I see the hon. Member for Stockton, North (Mr. Cook) on the Opposition Front Bench looking at me intently. Let us take British Airways as an example. There are people who drive aeroplanes, people who build hangars and transit facilities, people who operate those facilities, people who sell holidays and people who maintain the aircraft. There are also people who manufacture aircraft, but an airline needs all those things and all generate wealth and provide a service that people want.
Of course manufacturing industry is important, but one must consider the whole cake and not just a slice of it. Moreover, if the Opposition are still worried about manufacturing industry, the news is good. Productivity has increased by 43 per cent. and output is set to increase by 4 per cent. this year, as is manufacturing investment.
Conservative Members welcome the specific measures in the Finance Bill. I am pleased to see further action on profit-related pay. I have always been very keen on the idea of co-operatives. I cannot see why it is regarded as a Labour party idea, because the Labour party that we know—and perhaps love—has always believed in central control, believing that the party knows best and wanting to tell people what to do. In a co-operative, control is not from the top down but from the bottom up. It is about cooperation and working together for a common cause.
Profit-related pay is halfway between a normal firm and a co-operative. As with a co-operative, the better the firm


does, the better those who work in it will do, but a co-operative goes a stage further and those who work in it have an equity stake as well. As my hon. Friend the Minister and others have said, this is part of our policy of building up incentives and commitment at the workplace. The better the firm does, the better the workers will do. The greater the co-operation between workers and management, the greater the benefit. To my mind, that is a very Conservative philosophy.
I am not the only person to take that view. There has been massive interest in the scheme proposed by the Government. I understand that some 20,000 employers have requested further details because they are thinking of introducing it in their workplace. Nearly half the 250 largest companies in this country are interested to see whether they can make profit-related pay work in their enterprises. Opposition Members have said that it may well work. I am sure that it will work. I am sure that we will all be pleased by the result. It is a great step forward and it is an imaginative scheme.
One of the main issues in the Finance Bill is the broadening of pensions—the freedom and the flexibility of pension schemes that are going to be available to people. In future, people will be able to make their own pension arrangements. I, like many other people, worked for a company with a company pension scheme. I dare say that, when I retire at the age of 65, I shall get an extra two shillings and sixpence per week for five years' work. Had that pension scheme been transferable or had I been able to have my own private pension scheme and transfer that into my later pension schemes as I changed jobs later on, as people do, of course it would be worth a great deal more money to me. This is a long overdue improvement that should be welcomed.
My right hon. Friend said that it should encourage job mobility. My right hon. Friend, as we know, was a man of Industry and Energy. Now he has gone to the Treasury. Job mobility affects Ministers, and it is a good thing that it does affect Ministers. They get experience on one part and move on to another job. Perhaps my right hon. Friend will move on to become Secretary of State for Scotland or Wales after the next stage. We shall have to wait and see. For many people, moving from one job to another— career development—is valuable. I was in the services for 11 years. We used to get postings for two years, two and a half years or three years. We would do one job in one part of the services and then go on to another one. It was that build-up of experience of different jobs that helped to build up a total career and an understanding of the total operation. The change in pension schemes will be valuable in assisting job mobility. As my hon. Friend the Member for Beaconsfield (Mr. Smith) said, there is nothing worse tahn someone seeing out his time to retirement because otherwise he will lose his pension rights. That is again a much overdue change.
I said to my right hon. Friend in regard to a previous amendment that there is one area within the pensionable population that we should do something about. That is, those who have already retired—there is nothing that they can do about it any more — and have limited occupational pensions. They are not on supplementary benefit, they cannot get any other provisions that the state provides, and they have got only a limited occupational pension and limited savings. For those who are on the basic pension and supplementary benefit, and receive rate rebates, various other allowances are made. Those who

have large company pension schemes are better off than they have ever been before. Those who have built up big savings, as people have been able to do over the past eight years of the Government, are better off than they have ever been before. I put it to my right hon. Friend that we should introduce measures to help that group of people whom we have all found during the election campaign.
My right hon. Friend said—I think accurately at the time—that the way to deal with that is to deal with the age allowance. I make another plea to my right hon. Friend that, when we are considering the Budget, with the great success of the economy, with increased tax revenues, with the increased buoyancy of the economy, one of the things that we should be able to do above all during the next Budget is to help that group of people who have saved, been prudent, looked forward to tomorrow and to their old age and yet, at this stage, are not enjoying the benefits of the increased prosperity of the country. Let us see if we can do something really dramatic for them with the age allowance when it comes up in the next Budget.
There is one other point that I put to my right hon. Friend before I finish. One of the first political experiences I was ever exposed to — it was very formative — was going to a public meeting somewhere in Oxfordshire. It was a Conservative meeting and it was being addressed by my right hon. Friend the Chancellor of the Exchequer in a previous incarnation. I think that he was a prospective candidate at that stage; it was quite some time ago. It was the then policy of the Conservative party to go for something called the inheritance tax. We had something called capital transfer tax, we had something called death duties, and we have now got something called inheritance tax.
This inheritance tax is a whole lot different from that suggested by my right hon. Friend in those days—that which was Conservative party policy in those days. In those days, we would tax the amount that each recipient got rather than the amount that the donor passed on. There is a great deal of benefit in that. It encourages the spread of wealth. Also, there are those who are concerned about spoilt young men getting too much money too early in their lives. If on the one hand there is one spoilt young man with 10 rich uncles and they all leave their money to him, and on the other there is one parent, no uncles and 10 sons, it makes sense to introduce a real inheritance tax if it can be arranged. I understand that it would be difficult. I ask my right hon. Friend to think about it when he is thinking about inheritance tax. Let us see whether we can put the tax effectively on the recipient. It was party policy once rather in the way that we have got it now.
It is with great pleasure that I have studied the Bill, and it is with great pleasure that I have listened to two excellent maiden speeches. I hope that the Bill will be passed by the House this evening.

Mr. Malcolm Bruce: I shall make a brief contribution to what I hope will be a relatively crisp debate, although I am not convinced that it will be. The Bill has been before the House, counting Second Reading, on five full days and has been described as the tidying-up operation of what was not in the mark 1 Finance Bill. The debate has provided a good opportunity for, so far, two maiden speeches. Maybe there will be a few more. I join in the tributes that were paid to the hon. Members for Gedling (Mr. Mitchell) and for Oxford, East (Mr. Smith)


on their maiden speeches, one made after the other. Their speeches had a difference of character which, I think the House will agree, shows that we have two hon. Members who will make distinctive contributions. The hon. Member for Gedling claimed to be the fourth generation and, therefore, a member of a well-established dynasty. No doubt the hon. Member for Oxford, East hopes to be the first of a dynasty to represent his area.
My colleagues supported Second Reading and will support the Bill again tonight because of the main issues of which we have long been advocates. I say to the hon. Member for Northampton, North (Mr. Marlow), after his usually robust knock-about that we have heard, that it is true that many economic indicators are moving upwards. But I do not think that the House should forget that we are climbing out of a pit that was substantially dug by the first two years of Conservative party monetarist policy. The House should welcome the fact that we are climbing out of the pit, but some of us are a little less than effusive about giving all credit to the Government who helped to put us into the mess in the first place.
The Government make unqualified claims about inflation. It is worth looking at countries such as West Germany, which has a negative rate of inflation. The difference between its rate of inflation and ours is about 7 per cent. After all, it is our major competitor within the Economic Community. The Government should not argue that there is any cause for complacency about achievements in regard to inflation, particularly since many pressures are working through the economy at the moment and are pushing it in the opposite direction.
Two main measures in the Bill relate to personal pension schemes and profit-related pay, most of which are necessary and which I support. I shall make a comment on pensions, take up something that the hon. Member for Sedgefield (Mr. Blair) said and, maybe, develop it slightly further. The flexibility and portability that are developed in the Bill are welcome and essential to the way in which the economy will develop in future. It is right to be careful not to undermine the occupational pensions of those who are dependent on them. At the very least, we must ensure that everybody in society has an equal chance of making proper provision for their retirement.
It is time that the Government addressed what we should do about people who are in no occupational pension scheme, have worked all their lives, yet have made no provision for their retirement. In some cases, they should not be criticised, as they sometimes are by Conservative Members, when they reach the end of their working lives and find themselves dependent on the old-age pension and nothing else and, very often, are forced to apply for social security benefits. Many of those people have been misled by Governments of both complexions into believing that pensions would be kept at an adequate level on which to live. On several occasions, Governments have promised earnings-related provisions, but they have never been delivered.
The debate should go on from the Bill to consider how we can ensure that everyone makes proper provision for his retirement and recognises that, although the state will, rightly, provide the base, the old-age pension, most people will find life much more comfortable when they retire if they have an adequate means of topping-up the state pension. They should enjoy their retirement instead of

moving from a reasonably comfortable working life to abject poverty in retirement. Far too many people face the latter, and we should tackle the problem head-on.
I prefer the expression "profit sharing" to "profit-related pay" because it creates the climate within a company which the idea properly underpins. Profit sharing implies that the work force is being treated as part of the whole enterprise and that the provision is not simply a mechanism for topping up pay. Profit sharing detracts from the suggestion that has been made by some Labour Members that profit-related pay is a means of imposing backdoor pay cuts. Although there may be pay cuts, which the Minister does not deny, it is wholly malicious of Labour Members to suggest that that is the prime motivation for profit-related pay. Some Labour Members are clearly totally opposed to the concept in principle. The Liberal party has long favoured the idea of profit sharing and profit-related pay and managed to persuade one Labour Government to introduce such measures. Therefore, I support their extension and would have gone further than the Government have done and given generous tax relief to ensure that the provision would be of greater benefit to companies and individuals to build up the significant profit-sharing proportion of pay.
I was interested to hear the Minister's suggestion that the take-up may be substantially more than the £50 million forecast. I turn that round in the negative sense: if it is not more than that, the Bill will have been a failure. If the measures are at all beneficial, one would hope to see a take-up of hundreds of millions of pounds, and I hope that it will be developed even further in future Bills.
However, as someone who represents a party which is enthusiastic about the principle of profit-related pay, may I sound a note of caution? The enterprise which is creating profit must operate properly and fairly in a genuine free-enterprise economy and in a proper competitive market. During the past two to three years, the Government's enthusiasm for privatisation has got them into a bind. They have created some monolithic monopolies, and the Minister will not have to think hard to realise that, in some circumstances, the management and work force of a private monopoly such as British Telecom or British Gas may be more than happy to get together with a generous tax-funded profit-sharing deal, knowing that they have a monopoly with which they can rip off the consumer to fund that deal. I hope that the Minister is mindful of the need to ensure that the wider issues are taken on board and that we must have a proper, clearly directed competition policy. The enthusiasm of the hon. Member for Northampton, North for British Airways should be tempered by the fact that it appears to be following the same road — or it will if the takeover of British Caledonian goes through. I hope that it will not.
Despite the qualifications that I have mentioned and my anxiety that the proposals should be developed more fully and thoughtfully, I believe that the two main measures in the Bill are a valuable, important and essential step forward. I regret the fact that the Labour party will force a Division on the Bill. Labour Members are out of touch with reality, and it is difficult to justify their opposition when one examines the details of the Bill. I and my colleagues will vote in favour of the Bill.

Mr. Keith Mans: I rise to make my first speech in the House with a mixture of pride and hesitancy—


pride because of the honour that has been bestowed on me by my constituents to represent them here, and hesitancy because of the many excellent speeches that have gone before, especially the two maiden speeches this afternoon from the hon. Member for Oxford, East (Mr. Smith) and my hon. Friend the Member for Gedling (Mr. Mitchell). Indeed, I was beginning to get a little worried. If I had listened to many more excellent speeches like those, I would have become so nervous that I would have been unable to rise.
If one believes the media, I am a rare breed of person —a Conservative Member of Parliament from the north of England. But we are not nearly as rare as some Opposition Members would have us believe. In Lancashire, where my constituency is situated, there are no fewer than 13 Conservatives out of the total of 16 Members of Parliament.
Wyre is one of those constituencies which the Boundary Commission decided, in its wisdom or otherwise, to rename and, in the process, to consign to obscurity. During the general election campaign, one person came up to me and said, "Mr. Mans, will you please put us back on the map," clearly showing that the Boundary Commission had removed us from it. That statement was a little uncharitable because my predecessor, Sir Walter Clegg, certainly put his constituency on the map and kept it there for the 21 years during which he represented the people of the area. Indeed, I find it much easier to tell people that I am Sir Walter Clegg's successor instead of the Member for Wyre.
Sir Walter was a great Member of Parliament, much loved by his constituents, and a great parliamentarian much respected on both sides of the House, as I have already begun to appreciate in the short time that I have been here. He was a born-and-bred Lancastrian who lived in the area that he represented for most of his life. He understood his constituents and they respected his judgment and wisdom, as I have done since I have got to know him. He has a shrewd legal mind, which made him a keen scrutineer of legislation and a person who could intervene effectively when it mattered. Probably much more surprising, he was a much-liked party Whip in the Conservative Administration of the early 1970s.
Many hon. Members will know that Sir Walter has not been well of late. However, I am delighted to say that he is now out of hospital and making a good recovery. He wishes all his former colleagues well.
To most people, my constituency, with its major town of Fleetwood, means fishing. But the cod war round Iceland dealt the townsfolk a cruel blow and, sadly, the industry is only a fraction of its former self. But a small revival is taking place, led not by the established fishing companies of old, but by enterprising young skippers who are buying shares in boats, going out to fish and returning to sell their catch through the excellent shore facilities that still exist at Fleetwood. With a little loosening of the red tape — especially the Brussels variety — in terms of licences and quotas, while at the same time maintaining equal treatment in terms of policing for all boats of member states, there is a fair chance that this small revival will turn into something bigger. I am certain that this is something that all hon. Members would welcome.
The decline in the fishing industry has meant that ICI, with its large chemical works alongside the River Wyre, is now the main employer in the area. In my constituency we must fight for investment against the many other areas

that have assisted area status. It is a hard battle, which we do not always win. To those two industries should be added an expanding retail and tourist sector, a dairy farming sector and a high retirement population. My constituency is one of many contrasts and huge variety. Certainly there is enough in it to keep me occupied—I hope—for many years.
Wyre has one more characteristic which, I am sure you will be pleased to hear, Madam Deputy Speaker, brings me a little closer to the subject that we are debating today. Wyre is already a property-owning democracy. In fact, it has one of the highest levels of owner-occupation in the country. That figure is over 80 per cent., in a county that itself has a high level. In the past, Lancashire led the textile revolution. Today, Lancashire leads the revolution towards a property-owning democracy. The housing in my constituency is not the type that one finds in the leafy groves of Sussex or in the better suburbs of London. It is made up largely of small semis and of even smaller terraced housing. However, the people who live in and own those houses are proud of doing so and want nothing to do with a life that is dependent on institutionalised housing. That is probably the main reason why I am standing here this afternoon.
I am certain that it will not surprise at least some hon. Members to know that the borough council in Wyre is highly efficent. well run, and has a massive Conservative majority. Indeed, I could say that the benefits which it is hoped that the community charge will bestow elsewhere in the country have already been achieved in Wyre because of the high level of owner-occupation. I should add that I am not for one minute suggesting that, because we already have such a high level of accountability in Wyre, we should be exempted from the community charge.
Alongside property ownership goes the capital-owning democracy. More specifically, profit-related pay, share ownership and share ownership by employees represent an integral part of that. However, like property ownership in my constituency, profit-related pay is not new. Indeed, it is the main reason why I am speaking in today's debate. For the past 10 years I have been a member—perhaps I should say a partner—in the largest worker co-operative in the country, the John Lewis Partnership. That company has had a system of profit-related pay and of share ownership since before the second world war. I can say that profit-related pay and share ownership are successful. They work and are to be commended to other companies. I am not suggesting that all companies should have the same system. Indeed, there should be a variety of schemes, and I sincerely hope that any future Government measures are not too rigid so that decisions on the schemes can be taken by the participating firms. However, I believe that the concept itself is correct.
Unlike the hon. Member for Sedgefield (Mr. Blair), I believe that such schemes are an excellent use of Government money, because they encourage the private sector to take part in such schemes which, for many reasons, are good for everyone. Such schemes foster better communication between all levels of management and employed people in a company. They result in a greater commitment towards the objective that the company has set itself. They mean greater productivity, as I can vouch for in the firm in which I work. To date, I have not seen any evidence that profit-related pay means lower wages. Indeed, I suggest that Opposition Members should study carefully the wage levels of the companies that already


have such schemes and compare them with those that have not. I am certain that if they do so, they will discover that the firms in the former category have higher rather than lower wage levels, without the addition of profit-related pay put in as a bargain counter.
Finally, and something that should appeal to all hon. Members, profit-related pay and share ownership mean greater job security. I have seen it myself and I am certain that it will be truer in the future if more companies adopt such schemes. I have the sneaking suspicion that if they were given half a chance, many hon. Members of the Opposition parties would support, not oppose, this proposal. From my own experience in industry, I know that the concept of profit-related pay and share ownership works and that it will work even better in the future, provided that the proposals in the Bill become law. Therefore, I thoroughly recommend them to every hon. Member.

Mr. James Arbuthnot: It is with some nervousness that I say that I am grateful, Madam Deputy Speaker, for the fact that I have caught your eye. My constituency has not had many Members of Parliament. In fact, since 1924—nearly 30 years before I was born—it has had only two. Hon. Members will understand my difficulty in finishing this maiden speech within the bounds of propriety, or even by the end of the week, when I say that those two were Patrick Jenkin and Sir Winston Churchill. Whoever coined the phrase, "Follow that if you can", had it easy compared with me.
As one would expect, my constituents are exceptionally proud of their former Members of Parliament. However, I should like to speak first about my constituency, which is a residential suburb in the north-east of London, on the borders of Essex and London. My constituents were so proud of their former member, Sir Winston Churchill, that they put up a statue to him on Epping forest land, at Woodford Green. That is one of the more attractive parts of my constituency. One of the less attractive parts, which hon. Members may know rather better than the statue, is the M11, which starts in my constituency. Many hon. Members will probably have spent many an angry minute waiting in a traffic jam, trying to get on to the thing. I am delighted to say that that traffic jam will one day be a thing of the past, when the new link road is built.
A debate on the Third Reading of the Finance Bill is not the time to go in for a travelogue of Wanstead and Woodford. However, it is the time to mention my immediate predecessor, Patrick Jenkin, because among the many offices that he held were those of Financial Secretary to the Treasury and Chief Secretary to the Treasury. They may not be the offices for which he is most remembered, but that is only because he had so many others. For a man who served on the Conservative Front Bench for 20 years —that is nearly the entire time that he was in the House — and who was Secretary of State for three major Departments, that is quite an achievement. Indeed, when he was Secretary of State for each of those three Departments, his achievements were considerable. I know that he is remembered with great affection and respect by hon. Members of all parties. From canvassing during the general election, I can say that that is completely true in his constituency also. He will be an extremely hard

constituency Member to follow. I can best describe him by saying that he was a thoroughly worthy successor in every way to Sir Winston Churchill and I cannot think of higher praise than that for anyone.
Sir Winston was elected for what was to become my constituency on 29 October 1924. On 5 November 1924 he was invited to become Chancellor of the Exchequer. I have been waiting by the telephone, but it seems that promotion does not follow so quickly nowadays. It is interesting that, in his first Budget, two of the major proposals were a complete overhaul of the pension system and a reduction in the basic rate of income tax to what would now be 20p in the pound.
I do not wish to speak too much about the pension provisions in the Bill, save to say that I was a little sad that the hon. Member for Sedgefield (Mr. Blair), who made a most attractive speech—I wondered whether he was on the right side of the House—was a little grudging in his enthusiasm for the pensions provisions and for the profit-related pay provisions in the Bill. They will improve the employment prospects and the enterprise culture which the Government have already begun.
I wish to concentrate rather more on a narrow provision in the Bill — clause 96 and schedule 7. For those who are unaware of what they contain, I shall describe them in a moment, but first I must say that, as a barrister specialising in Chancery work and, inside Chancery work, mostly in tax, I am speaking about these provisions with considerable diffidence. I have taken an interest in Finance Bills for several years and I have never failed to be impressed by the depth of knowledge of hon. Members on all sides. Therefore, I am extremely nervous about preaching to an audience who may know rather more about my subject than I do. Having said that, clause 96 and schedule 7 relate to inheritance tax and capital transfer tax.
In the Finance Act 1986 capital transfer tax was abolished and inheritance tax introduced in its place. The effect was to make lifetime gifts between individuals potentially free of tax. I hailed that as an excellent move. The effect of the provisions in this Bill is to extend that relief to gifts into and out of trusts in which an individual has an interest in possession. This, too, is a truly excellent move. But I wish to take this matter a step further because what has happened in this move is symptomatic of what often happens in Finance Bills.
The Government rightly believe that they should reduce the burden of taxation on individuals and companies, and I congratulate my right hon. Friend the Chancellor of the Exchequer on doing that. However, all too often Governments do not go far enough. They are cautious and the following year they must return to finish the job. This has two effects. The first is that it complicates the tax system. We have one of the most complicated tax systems that I have ever discovered. The law, particularly tax law, is the possession of the common man and it should be understandable by him, but it is not. It is incomprehensible. When a Government take two bites at the cherry, they make the law more complicated. I have a vision of a tax system which is simply worded and administered and which everyone can understand. I hope that that vision will materialise before too long.
The second effect of two bites at a cherry is that the law is changed too often. It is not the Government's job to change the law too frequently because the effect of that on individuals and companies is to cause them the immense


extra cost of paying people like me to find out what the new law is because the law is never the same. Perhaps I should declare an interest, although I am speaking against this, but I do not believe that one should pay people like me too much to find out what any law is.
My right hon. Friend the Chancellor of the Exchequer has a praiseworthy habit of abolishing a tax every year. I had hoped that because there were two Finance Bills this year he would manage to abolish two, but I suppose one should not he greedy. I am sure that my right hon. Friend will have a chance and the inclination to reform our ramshackle tax system, particularly three areas of it. First, the taxation of women, which is an insulting and archaic antique; secondly, capital gains tax legislation, which is absurdly complicated; and, thirdly, the way in which the tax system relates to the benefit system, or rather, the way in which it does not. When my right hon. Friend has a chance to look at those areas, I have one plea, which is to go the whole hog the first time.

Mr. Tim Smith: It is a great pleasure for me to compliment my two hon. Friends the Members for Wyre (Mr. Mans) and for Wanstead and Woodford (Mr. Arbuthnot) who have made outstanding maiden speeches this evening.
My hon. Friend the Member for Wyre succeeded Sir Walter Clegg who, as he said, is remembered with much affection in this House. I am sure that we are all glad to know that he is making a recovery after his recent illness. My hon. Friend spoke with great authority about profit-related pay. As he told the House, he was until recently a partner in the John Lewis Partnership, which operates such a scheme, so he can speak with authority and from experience. He did not tell the House that the John Lewis scheme has recently been affected adversely by the change in the national insurance arrangements. Clearly he has a tremendous amount of tact, so should go far.
My hon. Friend the Member for Wanstead and Woodford spoke without notes, which I cannot do after 10 years in the House and I admire him for that, if for nothing else. It must also be clear to you, Madam Deputy Speaker, that he is a great expert on taxation and company law as he is a barrister in Chancery. He was rather modest when talking about clause 96 and schedule 7 because every year he writes an authoritative guide on the Finance Act. Therefore, he is a great expert on taxation. I sympathise greatly with his challenge to the Government that we should have a simpler tax system. We would all like to see that, but we all know that it will grow more complicated. There will be plenty of work in future for tax lawyers, so he need not worry too much. We shall look forward to his future contributions to our debates on Finance Bills.
This summer's Finance Bill contains two major proposals on personal pensions and profit-related pay, which we have already chewed over in some detail. The advent of personal pensions at the beginning of next year will present a difficult choice for many individuals and I hope that a proper and full explanation will be given to them of the pros and cons of the options before them. In future, they may join their company's occupational pension scheme, if it is open to them, or set up for themselves alone a personal pension scheme.
I notice that a debate on the virtues of the two approaches is already under way. An article in this morning's Financial Times reports the comments of a

partner in Bacon and Woodrow, a firm of consulting actuaries, who pointed out that the ideal arrangement under the present structure of occupational pension schemes will be for a young person to take out a personal pension in the early years of a career and later to join an occupational pension scheme, if that is possible. If that sort of advice is given to individuals, clearly occupational pension schemes will have to change their arrangements so that they are more attractive to young members. At present there is undoubtedly an imbalance in occupational pension schemes and younger members subsidise older members.
We have also debated profit-related pay at some length and we have considered the cost. If the cost was as high as £1,000 million, as the hon. Member for Sedgetield (Mr. Blair) suggested, 2·5 million employees would benefit to the tune of £400 every year, which is roughly the maximum benefit possible.

Mr. Blair: indicated dissent.

Mr. Smith: The hon. Gentleman shakes his head, but I calculate that 27 per cent. of £1,500 is about £400. I am talking about the average standard rate taxpayer. It seems that the maximum benefit available to the basic rate taxpayer will be £405 a year. Therefore, if the scheme costs £1,000 million a year, 2·5 million people will be able to benefit to the maximum. Of course, very few will benefit to the maximum every year so many more will participate and gain benefit from the scheme. If the scheme takes off on that scale I believe that it will be a runaway success. I agree with my right hon. Friend the Financial Secretary that, in those circumstances, we should view the cost as a major contribution to wealth creation rather than wealth consumption. Such wealth consumption would occur if we followed the advice of the hon. Member for Sedgefield and, rather than give this tax allowance, added that amount to public spending.
The hon. Member for Sedgefield referred to his experience, gained as a result of three Finance Bills. I agree with him that many of the provisions are technical and that, therefore, there is a case for a special committee to deal with those provisions. That argument has been advanced for many years by those who take an interest in such matters. It has always been argued that a distincition can be drawn between the political element of a Finance Bill—cutting the standard rate of tax and other elements that are highly controversial between the political parties, but which represent a small proportion of the clauses—and the many technical provisions.
It has been argued that it is unsatisfactory to introduce the Finance Bill so late in the parliamentary Session. Normally, the Bill is introduced in late March or early April and there is little time in which to debate the provisions. I believe that a distinction should be drawn between the two elements contained in a Finance Bill. I believe that a technical Finance Bill should be introduced at the beginning of a parliamentary Session in November so that more time can be addressed to it. Perhaps the Special Select Committee system should be used and outside parties invited to give evidence. Alternatively, a longer period of time should elapse between the publication of the Bill and the Second Reading and Committee stage of the Bill. In that way outside observers would have the maximum time in which to comment on the clauses. Indeed, the hon. Member for Sedgefield has


already argued that we should maximise the opportunities for consultation on technical matters. I believe that the consultation record of successive Governments has improved greatly over the years. Now it is the practice of Governments to publish, on occasion, draft clauses.
There is no excuse for bringing in technical measures at short notice after the Budget. It is right that draft clauses should be published wherever possible. In that way we can listen to the views of people outside — we need not necessarily take their advice—and I hope that the net result will improve the quality of the legislative process. There is scope for improvement.
We are often under a time pressure in Committee when considering Finance Bills. There have certainly been problems with this Bill even though some of the provisions were published in the previous Bill. This Bill has been pushed through fairly quickly and it is difficult for people outside to keep up to date. I hope that my hon. Friend the Paymaster General will discuss with his colleagues in the Treasury the way in which parliamentary consideration could be improved by allowing us more time.

Mr. Alex Salmond: I should like to associate myself with the remarks of the hon. Member for Beaconsfield (Mr. Smith) on the fine maiden speeches that we have heard this evening. I want to make a brief contribution and comment on this, my first Finance Bill. I believe that it has been an asset to have had detailed consideration—in Committee and on Second Reading—of certain aspects of this Bill.
I welcome the Government concession in clause 80 regarding oil industry taxation. That concession is a tribute to the effect that Back Benchers' detailed examination, from both sides of the House, can have on the Government's consideration of certain legislation.
My main contribution refers to profit-related pay, which is a concept that my party and Plaid Cymru—our parliamentary allies — favour. We believe that profit-related pay is a good idea on the basis of many of the arguments that have been advanced in its favour throughout the debate. However, on Second Reading and on considering the detail of the measure, certain aspects of the Government's proposal caused me great concern.
In common with the hon. Member for Oxford, East (Mr. Smith), who made an excellent maiden speech, I am concerned about the public sector. Is it right and proper that the public sector should be excluded from the benefits that are being offered to the private sector? I suppose that a reason for that exclusion could be practicality. It could be argued that it is not possible to associate the public sector with this legislation in the same way in which a public limited company or companies within the private sector can be related. I believe that the acid test of whether practicality is a reason for excluding the public sector comes with the consideration of public limited companies with majority public sector ownership. If it was purely a question of practicality, surely a public limited company, such as the Rover group, in dominant public ownership, could still he included under this legislation. It is a clear entity generating profits and it could be brought within the scope of profit-related pay.
The Government, however, have made it clear that any public sector company will be excluded from the profit-related pay legislation. That leads me to suspect that the public sector is being excluded not on the ground of practicality, but because of naked prejudice against the public sector. It is unacceptable that those who work in education, the Health Service and the social services are viewed by the Government as somehow contributing less to the economy than those who work in the private sector.
I am also concerned that the tax benefits from profit-related pay will not be restricted to the basic rate of income tax. The essence of the argument in favour of profit-related pay is that it associates individuals with the profitability of the company. On those grounds I believe that the individuals most in need of that association are those on average or somewhat below average earnings. However, as a result of the Government's proposal, most of the benefits will go to people on the highest rates of income tax. If a person pays 60 per cent. income tax, the potential maximum benefit is £900 a year. If a person is on the basic rate of income tax the maximum benefit is £405 a year. If the Government are seriously interested in transforming the supply side of the economy the reverse should apply: the biggest benefits should go to those on average or somewhat below average earnings.
If one considers the details of this legislation, it is clear that, cloaked in the rhetoric of the supply side measures, it is yet another shabby attempt by the Government to give handouts to their friends and supporters.
I am aware that many Conservative Members are puzzled by their party's poor performance in Scotland. That failure was largely due to that party's lack of appreciation of the national question. However, there is also the matter of morality. I do not believe that Scotland likes the morals of this Government. On the matter of profit-related pay we once again see prejudice against the public sector and favouritism towards those on highest earnings.
For those and other reasons my party will vote against the Finance Bill tonight.

Mr. David Shaw: I welcome the Finance Bill and in particular the two main proposals, the introduction of profit-related pay and the proposal to widen pension ownership. I believe that those proposals will lead to people taking more control of their lives. With regard to profit-related pay, people will take responsibility for the success of their own companies. They will also take responsibility for and an interest in the success of the economy in relation to the benefits that they will receive from their pensions. The consequence of those proposals will mean that working people will be less alienated from the goals and objectives of management. All will be involved in the success of their companies and the wider success of the economy.
It is likely that more innovation and positiveness on the part of employees on the shop floor will result from the measures. That can be contrasted with the negativeness and destructiveness that characterised so much of industrial relations during the late 1970s. Much of it came from the friends of the Opposition, but it is interesting to see how many of the more moderate leaders of the trade unions are now becoming interested in profitability and the success of the companies in which their members are employed. I hope that my experience in giving profit-


related pay benefits to management and senior employees will he followed for a wider audience, by bringing in all the employees. Whenever I have been involved in the bringing in of profit-related pay schemes, I have seen management take a new interest and experience a new incentive to perform better. Under past schemes involving all employees, many more employees were interested in the success of their companies.
Opposition Members have suggested that such schemes could be a recipe for low pay. Nothing could be further from the truth because, in my experience of industry and business, the companies in which there is low pay are those that lack success. Where companies are successful and it is understood by the employees that profit needs to be earned, there is high pay because such companies can afford to make contributions to profit-related pay schemes and give high pay.
We have seen the benefits of employee involvement in share option schemes, which has been one of the Government's successes. I am pleased to say that in my constituency there is a share option scheme in one of the more significant industrial companies in the area. It goes right down the scale, involving those on the shop floor as well as the secretaries and typists in the pool. It also involves management. I am pleased to say that it does not matter whether one talks to someone at the top or bottom of the pecking order; everybody is intensely interested in the share price in the company from week to week and day to day. The people who work in the company are intensely interested in its success. I long for that to continue because it is by involving more people in the success of their companies that we shall engender the necessary changes.
I hope that my hon. Friend the Paymaster General will consider the letter in the Financial Times today, which expresses the concern of a company called Reward Consultants about the way in which profit-related pay schemes may impact on small businesses. As with all good innovations, there are technical requirements. Perhaps the Inland Revenue is sometimes over-zealous in the way in which it brings in technical requirements, when it wants to make sure that there is no tax evasion. I hope that the Minister will consider the fact that profit-related pay should be a simple concept, easily understood by the man on the floor, the accountant in the company who has to compute it, and the managing director who devises the scheme. We do not want lots of bureaucracy. I hope that the special needs of small businesses and small companies will he borne in mind when the scheme is changed. Inevitably, minor changes will he required over the years to make sure that the scheme is effective and efficient.
It has been suggested that one of the disadvantages of profit-related pay is that tax revenue is lost by that means. That is utter bunkum and rubbish. More tax revenue must result from the scheme because, in the main, profit-related pay will come out of a pool of between 5 and 20 per cent. of the increase in profits over the previous year of the companies. If that is so, at least 80 per cent. more profitability will not form part of profit-related pay. As corporation tax still exists, even in many small companies, at rates of at least 30 per cent., there will be more revenue for the Exchequer as a result of the increase in profits. Therefore, it is extremely unlikely that profit-related pay will result in a loss of revenue. As profits become larger, it should result in more money going to the Exchequer.
Benefits will result from the widening of the ownership of occupational pensions suggested in the Bill. Over 10

million people are now involved because of the widening of ownership of occupational schemes. As many of my hon. Friends and no doubt many Opposition Members are aware, that is well above the number of people in trade unions. Many trade unionists are members of occupational pension schemes. That involvement of the electorate in occupational pension schemes and the fact that each year more trade unionists are involved accounts for rising Conservative popularity not only in the most recent general election but in previous general elections. It is through the ownership of pensions that people begin to understand what share ownership is all about. It is through widening share ownership, whether directly or indirectly, that we involve more people in the benefits of the nation.
Benefits also arise from more choice in pensions, as proposed in the Bill. One can now be a member of more than one pension scheme, and one can opt out of occupational pension schemes if one wishes. That means that there will be more competition among managers; of pension schemes to keep people in those schemes wherever possible. More competition is good because it will result in greater emphasis on investment performance, which is important to the economy as a whole. We do not want scandals continuing, such as the Labour councils investing pension fund money in News on Sunday. At the moment, those scandals are swept under the carpet because pension fund performance is not observed as widely as it should be. That will happen and such scandals will be prevented under the new proposals because pension fund performance will become more important.

Mr. Robert N. Wareing: What about insider dealing?

Mr. Shaw: Insider dealing has been exposed as never before by this Government. This Government has made it illegal, which the previous Labour Government railed to do.
Fairness to those who change jobs was mentioned by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who has fought for it for a long time. Many Conservative Members, particularly younger Members, have perceived that the job market has never been so good as it has been in the past eight years compared with periods under previous Governments. One has taken the opportunity to change jobs. I declare an interest, as did other hon. Members. It is galling to all of us who have changed our job that we cannot take advantage of the pension fund money that accumulated in our previous pensions. It is wonderful that the Government are slowly grasping the nettle and making an improvement.
I should like to express a mild note of concern on clause 80. We are all concerned that retrospective action should not take place often, if at all. It is a matter of considerable concern that it has been necessary to include this retrospective action in the Bill. It may be a mild case of the Inland Revenue being too worried about tax avoidance or tax evasion. The clause affects oil licences, which cost money. Expenditure is incurred. When companies try to minimise the risk involved in that expenditure, it is unfair that they are heavily taxed. I hope that that anomaly will be removed. I am pleased to note that Ministers have said that they will look at that when they draft the next Finance Bill.
The Bill will bring immense benefits to our economic performance over the years ahead. I am particularly


pleased with the improvements that the Bill brings to the overall financial situation of companies and private individuals, who will benefit more from their own contributions. I support the Third Reading of the Bill.

Mr. Nicholas Soames: The House has heard four excellent maiden speeches tonight. However, it will be surprised that those hon. Members who made them have not been able to be detained by the debate. Nevertheless, it would be improper for me not to say a few words about their speeches.
We heard from my hon. Friend the Member for Wyre (Mr. Mans), who took over from Sir Walter Clegg, who was an hon. Member much loved on both sides of the House. He was a distinguished and honourable Member of the House who will be remembered especially for his humour, courage and charm. All hon. Members will be glad to hear that he is making a full recovery from his illness. My hon. Friend the Member for Wyre made an excellent speech and showed a considerable feel for his constituency and a real knowledge of the matters about which he spoke—not least as he is a partner in the John Lewis Partnership, and was thus able to bring a good deal of knowledge to the debate.
I pay tribute also to the maiden speech made by my hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot), who represents a constituency that my grandfather represented in the House for more than 40 years. My hon. Friend succeeds Patrick Jenkin, a Member of Parliament who was greatly admired for his integrity, warmth, exceptional capacity for hard work and intellect. He was Financial Secretary and Chief Secretary to the Treasury, as my hon. Friend mentioned in a witty, knowledgeable and excellent speech. I am sure that the House will look forward to hearing from him again.
Earlier in the evening, my hon. friend the Member for Gedling (Mr. Mitchell) made an excellent and attractive speech. The hon. Member for Oxford, East, (Mr. Smith), to whom I am sure the House will have warmed, paid an elegant, charming tribute to Steve Norris, who was greatly admired on both sides of the House, and who will be much missed.
I take this opportunity to welcome the hon. Member for Sedgefield (Mr. Blair) to these debates. He will bring an economic literacy, ability and good humour that has been sadly lacking from the Opposition Front Bench, and will be welcomed warmly by all those who haunt these rather dry debates.
This is also an opportunity to say farewell to absent friends. It seems almost strange not to have the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) with us. He must have forecast gloom and disaster at least 30 or 40 times in the last Parliament—on every occasion on which he spoke in major economic debates, the economy was permanently headed for utter disaster. He proved disastrously wrong and I am sure that we sympathise with him. He has had to pay the price for his tragic performance in the past election. We welcome the new Treasury team to the Opposition Front Bench; I am sure that its members will prove to be formidable opponents.

Mr. Ian Gow: Does my hon. Friend recall that during the general election campaign of 1983 the right

hon. Member for Sparkbrook predicted that within one year of the general election inflation would reach 10 per cent? Would my hon. Friend care to comment on the value of that forecast?

Mr. Soames: My hon. Friend, as usual, raises the key point. The trouble with the right hon. Member for Sparkbrook——

Mr. Blair: On a point of order, Madam Deputy Speaker. We are perfectly willing to be subjected to a filibuster when it consists of flattery, but when Conservative Members filibuster and insult us at the same time we are entitled to protest.

Mr. Soames: I think that that is going a bit far. My hon. Friend the Member for Eastbourne (Mr. Gow) was oozing the milk of human kindness. It is difficult to imagine how it would be possible to be nicer. Suffice it to say that it is probably better for us all to leave summarising the career of the right hon. Member for Sparkbrook, as the hon. Member for Sedgefield says, to another occasion. I shall try to stick to this important debate.
I congratulate my right hon. Friend the Chancellor, the Chief Secretary to the Treasury and their colleagues on their excellent and warmly welcomed Budget. At the same time, my right hon. and hon. Friends will be sustained by the fact that it was so splendidly endorsed by so handsome a victory at the last election. The Government have set the framework—[Interruption.] Does the hon. Member for Liverpool, West Derby (Mr. Wareing) wish to intervene?

Mr. Peter Snape: My hon. Friend is not allowed to speak; he is a Whip.

Mr. Soames: I am glad that they found someone to go to the Opposition Whips Office. I thought that they had all disappeared.

Mr. Snape: They would not have me.

Mr. Soames: I am not surprised.
The Government have set the framework during the past few years for the economy to prosper. It has proved to be a startling success, and even the Government's harshest critics have now had to accept the sound policy that my right hon. Friend the Chancellor and his colleagues are pursuing. The Finance Bill is a welcome extension of that overall strategy.
I want to make a point about my own constituency in relation to the legislation. Right hon. and hon. Members of the Opposition—and, indeed, my hon. Friend the Member for Eastbourne—will well remember the point that the right hon. Member for Sparkbrook used to make about the crisis in manufacturing industry in this country. In my constituency, which is fortunate to have full employment and a booming, successful labour economy, the local paper only the other day ran a headline saying that "Mrs. Thatcher's Britain" was "on the move". On the move it is. Manufacturing industry and service industry are booming. All the statistics and all the feelings that one gets listening to people talk show that industry and the economy are going through a great awakening. My right hon. Friend and his colleagues have achieved a tremendous renaissance in this country and we warmly welcome that. Manufacturing industry is doing every bit as well as the service industry, which gives the lie to what Opposition Members say.
I warmly welcome the profit-related pay provisions. I believe that that is one of the key points — the


centrepieces — of the Budget. Profit-related pay gives employees a far more direct personal interest in the profitability of the firms in which they work. My hon. Friend the Member for Wyre, a partner in an organisation that already practises these excellent ideas, spoke about that this evening.
Profit-related pay allows a greater pay flexibility in the face of changing market conditions. For example, a company might be able to survive a downturn in trade without recourse to redundancies if its pay bill is flexible downwards as well as upwards. One would have thought that that would have been warmly welcomed by the Opposition, in view of the so-called interest that they take in unemployment matters, as demonstrated by how many of them are here in the Chamber. The economy also gains from profit-related pay because a broad spread of PRP schemes means better productivity, increased output and more employment. Again, I should have hoped that that would have been welcomed by the Opposition. Interest in profit-related pay has been substantial. My right hon. Friend the Financial Secretary to the Treasury made the point that, since the Chancellor announced tax relief on PRP in his Budget, more than 20,000 employers have contacted the Inland Revenue to establish their interest.
The measures on pensions provisions will widen individual choice in pension planning by providing tax relief for people who make their own pension arrangements. The measures will also, more importantly, contribute to job mobility—one of the sad problems that has affected all our efforts to reduce unemployment. Anything that can increase job mobility will be warmly welcomed by those out of work. It is a tribute to the Government's strategy that all sound, responsible and decent financial indicators and opinion in this country point to a remarkably successful economy.
The CBI monthly trends inquiry of 22 June showed orders at their highest level for 10 years, with exports booming. Many firms are planning increased production for the next four months to cope with a rise in orders. The average growth rate forecast by 12 recent surveys was 3 per cent. in 1987. Manufacturing industry's recovery has been underpinned by a strong and continuing growth in productivity. Since late 1980, the productivity in manufacturing industry has risen by 43 per cent. That is the best performance of any industrialised country. [Interruption.] Labour Members may chunter away, but these are facts and they cannot argue with them. Our economy is booming and that is bad luck for the Labour party. The Government's record was given a remarkable endorsement by the electorate, although the hon. Member for West Bromwich, East (Mr. Snape) managed, yet again, to sneak in under the wire.

Mr. Gow: Before my hon. Friend leaves this part of his speech, would he care to comment on the remarkable tribute to the management of the economy by our right hon. Friend the Chancellor of the Exchequer that was paid in the debate on the Loyal Address by the hon. Member for Dagenham (Mr. Gould), who unfortunately is not in his place?

Mr. Soames: My hon. Friend is right to draw attention to another of the gilded and literate team that is now adorning the Opposition Front Bench. The hon. Member for Dagenham (Mr. Gould) is another Labour Member who can read.

Mr. Blair: On a point of order, Madam Deputy Speaker.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer): Is the hon. Gentleman going to deny it?

Mr. Blair: About the only correct thing that the hon. Member for Crawley (Mr. Soames) said was that Labour Members can read. Indeed, they can read better than Conservative Members. May I seek your guidance, Madam Deputy Speaker? On Third Reading, should we not be debating the contents of the Bill and not having a general debate on the economy?

Mr. Deputy Speaker (Miss Betty Boothroyd): The hon. Member for Crawley (Mr. Soames) has been a Member for some time and should speak to the subject.

Mr. Soames: I am very sorry that I was dragged off the narrow road that I was treading. I shall not pursue the point raised by my hon. Friend the Member for Eastbourne, although it was a relevant issue.
The hon. Member for Dagenham was endorsing Government policies which were headlined in the Financial Times today as "the unbeatable combination" of lower taxes, lower borrowing and higher public spending. The Government's policies were endorsed by the electorate and were made possible by the sort of measures that appear in the Finance Bill. I welcome them very much.
I shall conclude before you, Madam Speaker, dive too deeply into "Erskine May". Sustained economic growth has set unemployment on a firm downward trend. The House will rejoice at that. Seasonally adjusted adult unemployment has fallen over 12 successive months by almost 290,000. Between May and June, unemployment fell by 24,000 to 2,925,000 — 10·6 per cent. of the working population. The figure is still far too high, but the House will wish to pay tribute to Government policies that are denting the unemployment figures and putting so many people back to work in important areas of the economy.
The Government's programme is enshrined and fashioned in the Bill. Lower taxes, lower borrowing and higher public spending form a programme which was ringingly endorsed at the general election. We rejoice to see the Chancellor of the Exchequer putting forward that programme again and I have no doubt that the House will endorse it.

Mr. Julian Brazier: I shall speak only about the part of the Bill dealing with portable pensions. It will not produce headlines in the media, because it suffers from two defects — it is not particularly controversial and it is quite difficult to understand. Faced with such complicated provisions, the House could easily lose sight of the fact that the provision on portable pensions is a very important measure and may be the most underrated measure to come before us this year.
My constituency has the second highest proportion of pensioners in the country. Many of them are occupational pensioners and I receive many letters — often heart-rending letters — about their pension problems. Some complain that their occupational pensions have been destroyed by the rampant inflation caused by the profligacy of previous Governments and others have more


technical problems, especially in connection with losses of pension rights incurred when people move from job to job. The Bill is designed to counter that problem.
Of course, some of my constituents have no occupational pension; 49 per cent. of pensioners still have no such pension. I am glad that the Bill will enormously improve the ability of those working for companies that do not operate occupational pension schemes to get such pensions.
Sad to say, we cannot solve most of the problems of the people who write to me. The trouble is that they are worried about the difficulties that arose in the past. However, the Bill will go some way to preventing another such crop of miserable problems from arising in the next generation. The Bill should ensure that the proportion of people with occupational pensions continues to rise and that those who change jobs have a better opportunity to maintain their pension rights.
As I listened to the erudite debate between my hon. Friend the Member for Kensington (Sir B. Rhys Williams) and my right hon. Friend the Financial Secretary to the Treasury. I remembered that when I was a mathematician at Oxford nearly all my clever colleagues— I was not one of them—went on to become actuaries, working in an extremely complex and difficult area. I am not a bit surprised that most members of the public and, perhaps, a number of hon. Members will have had some difficulty following the intricacies of the debate.
At the heart of the problems caused by people who move from job to job is a simple but intractable bias in the system. I am glad that the Bill will go some way to counter it. If we regard the 40 years of a man's working life as annual packets of pension contributions, we see that when a man changes jobs the packets get bundled together into various small pension trusts, each with its own management system, and so on.
The only employer with whom the man who changes jobs has any leverage is the one to whom he can say, "Will you offer me a decent pension package?" That is the only employer with whom that man has any negotiating power. The imbalance is brought into the system by the fact that his most valuable pension payments— those with many years to accrue—are made at the beginning of his 40 years of service. His employer of those days is lost in the mists of time and the employee has no leverage with him.
I was entranced by the debate between my hon. Friend the Member for Kensington and the Financial Secretary. I side with my right hon. Friend, because I believe that the proposals suggested by my hon. Friend the Member for Kensington would be too expensive.

Mr. Blair: On a point of order, Mr. Deputy Speaker. The hon. Member for Canterbury (Mr. Brazier) is making an erudite speech, but new clause 1, which he is talking about, was withdrawn and, therefore, forms no part of the Bill. Is it in order for him to be discussing that new clause?

Mr. Deputy Speaker (Sir Paul Dean): It is traditional for the debate on the Third Reading of a Finance Bill to range fairly wide. However, perhaps the hon. Member for Canterbury (Mr. Brazier) is going a little wider than wide. I am sure that he will note that fact.

Mr. Brazier: I take the point made by the hon. Member for Sedgefield (Mr. Blair). The Bill goes a long way towards meeting the demands made by my hon. Friend the Member for Kensington.
The measure on portable pensions has an indirect effect that goes well beyond its direct effect. I shall illustrate that point. As I understand it, the measure offers the right to anybody who wishes to do so to ask to have a personal pension scheme set up. He can do that either through independent contributions or can decide to opt out of his company's pension scheme. As a result, a small number of people—and I suspect that in the beginning the number will be small—will choose at the outset to go for a pension package of this sort, one that they can manage themselves all the way through their working lives, because of the problems that they see encountered by people who move jobs.
That is the direct benefit, but there will be a much greater indirect benefit because the fact that people can do this and that employers will know that people joining them will be able to follow this course of action will encourage employers to reform their pension funds and sort out the problem of the prejudice against the early leaver. People will then be induced to stay and to keep all the contributions in the pension fund and will see an employer as an attractive one to work for.
I hope that when we debate our own pay later this week hon. Members will remember that we enjoy very privileged pension provisions. An hon. Member who sits in the House for 15 or 20 years will get, pro rata, the same pensions benefits when he retires at the age of 60 irrespective of whether he is elected to Parliament at the beginning of his working life, in the middle of it or during the last 20 years of his working life. That is not the case at present with any private sector pension fund.
I make no apology for concentrating exclusively on the pension aspect of this Bill. The measure will extend to people in the private sector some of the benefits that hon. Members enjoy. It will well be that before too long some Opposition Members will find a more attractive career. They may then appreciate the position of people in their forties and fifties who presently feel trapped in their jobs and want to move to more attractive ones. I support the Bill.

Mr. John Browne: I support the Bill. Like other hon. Members, I declare an interest in certain sections of the Bill such as pension provisions and profit-related pay. I join other hon. Members in congratulating the four maiden speakers, three of whom are my hon. Friends the Members for Gedling (Mr. Mitchell), for Wyre (Mr. Mans) and for Wanstead and Woodford (Mr. Arbuthnot). My hon. Friend the Member for Wanstead and Woodford spoke without notes. That would be an achievement for any hon. Member, but for a Member making his maiden speech it is worthy of note. The hon. Member for Oxford, East (Mr. Smith) was extremely fair in his maiden speech. I was impressed by his speech and hope that in future we shall hear more from him and from my hon. Friends.
This part of the Finance Bill, covering the areas not agreed to before the general election, is the legislative backing for part of the Budget. In itself, the Budget is a testimony to the successes of an eight-year crusade of national revival. The revival of our economy was not the


only thing that happened during that crusade, but it is the critical factor. The success of the economy depends on freedom and enterprise. Profit-related pay and personal pension schemes arc part of the whole philosophy of freedom. We hope that this injection or restoration of freedom will result in a great increase in enterprise. In the eight years of this crusade a foundation has been laid. Doing that was often tough and unglamourous, but now we are entering an era during which the superstructure can be erected. There are exciting times to come, and the whole of Britain can share in them.
Government philosophy is to base economic policy on sound finance, reducing inflation and increasing growth. Those things have eluded almost every Government not only in Britain but in the West. The problem is how to break the link between inflation and growth. In the old days, when we wanted growth we ended up with high inflation. If we wanted to reduce inflation, we ended up reducing growth. The Government have succeeded in breaking that link.

Mr. Blair: Regretfully, Mr. Deputy Speaker, I have to raise another point of order. The hon. Gentleman is debating the general economy, and, no matter what latitude is allowed during our debate on Third Reading of the Finance Bill, that is surely out of order.

Mr. Browne: rose——

Mr. Deputy Speaker: Order. The hon. Member for Sedgefield (Mr. Blair) raised a point of order a few moments ago. I explained to him and to the House that, by convention, on Third Reading of the Finance Bill it is in order to range rather more widely than on Third Reading of any other Bill, particularly in the special circumstances in which this Bill is being discussed. I know that the hon. Member for Winchester (Mr. Browne) is still on his preamble, and I am sure that he will shortly relate his remarks fairly directly to the clauses in the Finance Bill.

Mr. Browne: I listened to a number of speeches in Committee by the hon. Member for Sedgefield (Mr. Blair). They were extremely good and delivered in an erudite manner. I might say that they were charming and elusive. I must remind the hon. Gentleman that at times he strayed into the realms of the general economy during debates on specific clauses in the Bill. I take your point, Mr. Deputy Speaker, and I shall get into the main part of my brief speech.
As the Bill well documents, the Government have transferred power from the producer to the consumer. I shall give one example. In personal pension schemes the measures taken by the Government are oriented towards the consumer, the beneficiary of the pension. The measures will make the competition much tougher for the pension institutions. This will result in much more competition in the market place for pension schemes and that will benefit the consumer. As a result of this general philosophy, Britain is much more competitive now than it was eight years ago.
We have restored democracy to the trade unions and that has made Britain work as a team. This team spirit will be reflected in the profit-related pay measures designed specifically to keep the team together. They will motivate the whole team, not just the directors or the shareholders. People working on the shop floor can be directly involved in the profits of their company. The Government have

always tried to push, quite rightly, for incentives so that enterprise will take place and Britain will be a success. What more incentive could someone on the shop floor wish to have? What could be more directly related to their contribution than profit-related pay? A bonus has an element of subjective merit that is recognised by the management rather than by the customer, but PRP reflects recognition by the customer. The subjective judgment of management does not apply to PRP. We have already seen the British economic disease become the British economic miracle, and I urge Opposition Members to bear that in mind when they criticise various elements of the Bill.
The hon. Member for Sedgefield has said that PRP will cost too much. Four or five days ago he claimed that it would cost between £50 million and £1,000 million. If it were to cost £1,000 million, that would be a mark of its success. If the work force were able to claim to the tune of £1,000 million, think of the increased profits that would have to be won by the companies employing those enjoying tax deductions. A large tax reduction will be a good thing for the economy, because we know that lower taxation rates lead to an increase in aggregate tax revenues. That means that more revenue is available to the Government to spend on education, defence and social welfare, for example. The result is the same if a company can give its employees more take-home pay as a result of measures such as PRP.
By introducing PRP the Government have struck a good balance because the range of companies that will come within the scheme is well chosen. The Government have shown a great understanding of management and of motivation of those on the shop floor. The scheme reflects the urge to be identified with something that is small and the concept that small is beautiful. The Government are demonstrating that profit centres are to be encouraged, and their flexibility is to be applauded.
The personal pension scheme provisions will improve and encourage motivation, enterprise, mobility and freedom of choice. There will be more incentive and consequently better results and a fairer and better system. In other words, there will be a cheaper system for the consumer and, therefore, a greater incentive for the consumer or employee. That will lead to greater success for Britain.
I ask the Opposition to accept that some of the Government's policies are seen to be working. Satisfied customers throughout the world are creating jobs in our economy. Real jobs are being created at a fast rate. There have been 12 months of successive falls in unemployment and about 1·25 million jobs have been created in the past 18 months, not as a result of a Government spending gimmick. Real jobs have been created by the consumer, not false jobs by the Government, and this has been achieved on an international basis.
It has been said that PRP will be too costly, but we have seen Government revenues rise despite cuts in tax rates. Government revenues are rising along with private incomes. Therefore, the Government can give more effective care to the inner cities, for example.
I strongly support the Government in introducing the Bill, which is the second part of the legislative backing to be given to the Budget. I applaud particularly the PRP measures and the provisions that have been made for personal pension schemes. I applaud also the Government's constructive attitude in their negotiations with Lloyd's, which have been based on the provisions in


clause 70. It appeared that the negotiations would be sticky, but I believe that people on both sides of the fence have been pleased with the Government's attitude. I commend the Government and I welcome and support the Bill.

Mr. David Heathcoat-Amory: The two major proposals in this No. 2 Finance Bill relate to personal pensions and profit-related pay, and the success of PRP will be judged later in the light of experience. It is a worthwhile attempt to improve the supply side of the economy, especially wage flexibility. It may not prove to be the great breakthrough that we want, and we shall have to wait to see what the take-up is and its effect on wage bargaining. Only time will tell us whether employees are prepared to recognise PRP as part of their remuneration package and not merely as a bonus.
Profit-related pay is worth a try because previous Governments of all parties have been inclined to concentrate too much on controlling aggregate demand within the economy whereas the central weakness of the British economy has been translating demand into efficient and effective supply. There has not been lack of demand. In other words, the issue has been the ability of industry and commerce to meet demand without that demand leading to higher prices or increased imports. This central fact seems now to be dimly recognised on the Opposition Benches. Recent speeches by Opposition Members suggest that they feel that there is too much demand in the economy rather than too little. We hear that private credit is too buoyant, that consumption is too high and that too many people are enjoying themselves. Instead of advice that we should be reflating we have a warning that we are about to have a balance of payments crisis. That warning figured prominently in the speeches of Opposition Members before the general election. It is of great credit to the strength of the economy that no such crisis has occurred.

Mr. Blair: On a point of order, Mr. Deputy Speaker. I well understand your ruling that on the Third Reading of a Finance Bill we have greater latitude than on Third Readings of other measures, but I respectfully submit that hon. Members cannot enter into a general debate on the economy, including economic growth and the balance of payments. I draw your attention, Mr. Deputy Speaker, to page 840 of "Erskine May", part of which states:
While the normal rules relating to the scope of debate on third reading apply to the Finance Bill as much as to other bills, in practice some degree of latitude is frequently permitted.
I submit that that means that we can refer occasionally to the economic effect of certain clauses in a broader way than would be possible when participating in other Third Reading debates, but we cannot translate a Third Reading debate into a Second Reading debate. When discussing a Finance Bill two years ago, some of my hon. Friends were very much slapped down by the Chair when they sought to broaden the scope of the debate, and I am concerned at the breadth of the debate.

Mr. Deputy Speaker: The hon. Member for Sedgefield (Mr. Blair) has partly answered his own point of order by quoting from "Erskine May" and making the distinction,

as "Erskine May" does, between Finance Bills on Third Reading and other Bills. As he has said, it is permissible to range more widely on Third Reading of a Finance Bill. The Chair must take into account also the special circumstances of this Finance Bill, which has not been discussed at great length. It has not been subject to the probing that normally takes place in Standing Committee. All these matters must be considered. In addition, I must take into account that the hon. Member for Wells (Mr. Heathcoat-Amory) has been speaking for only a minute or two. I am sure that he is still in his preamble and that within a few moments he will address his remarks specifically to various clauses in the Bill.

Mr. Heathcoat-Amory: Thank you, Mr. Deputy Speaker. In fact, I was addressing very directly the likely consequences of an important provision of the Bill, because it is a crucial element in the strength of the economy and the absence of a balance of payments crisis that we now have the supply side improvements that profit-related pay will do everything to encourage. That is why I drew attention to the fact that the balance of payments crisis about which we heard so much from the Opposition before the election —a crisis so confidently predicted, so earnestly hoped for and so fervently prayed for — has not occurred. It has been postponed, and I believe that it can he postponed indefinitely if improvements in efficiency and productivity can be maintained. It is in achieving those aims that profit-related pay has a part to play.
Nothing that I have heard from the Opposition has suggested that they have a better approach. I listened in vain to the hon. Member for Sedgefield (Mr. Blair) in case he had some better key to improvements in the supply side to put forward as an alternative. I listened in vain to the municipal Socialists who talk about Socialism in one borough. The only practical consequences of their policies for business are higher rates and politically inspired constraints written into commercial contracts.
I listened in vain, too, to speeches from SDP and Liberal Members. I read their manifesto with interest, but all that they had to offer was a proposal of so-called industrial investment boards to be scattered around the countryside. No doubt those will now be abandoned as part of democratic fusion. However, alliance Members fail utterly to address the central weakness of the British economy, which has never been a lack of demand but a lack of effective supply.
That is why I congratulate my right hon. Friend the Chancellor and his team for an imaginative proposal that directly and effectively addresses our past weakness. Profit-related pay represents a bold and worthwhile attempt to tackle the continuing problem of inflexibility in the labour market. However, there is still a word of warning to be sounded. Nominal wages are still rising at twice the rate of inflation and I believe that inflationary dangers could lie ahead. That is why profit-related pay deserves a welcome and a chance. If we can achieve greater awareness in the minds of employees about the links between investment, profitability and jobs, and bring to the labour market the greater flexibility to which I alluded, we shall have found the best way of keeping inflation down while promoting industrial efficiency and effectiveness.
One of the tax regimes in the Bill has not been discussed at length, either on Second Reading or in Committee. It relates to the close companies referred to in clause 61,


which was not discussed or voted upon, and I do not intend to criticise the clause. Perhaps I should explain for the benefit of the House and the less technically inclined that a close company is one that is controlled or owned by fewer than a certain number of individuals or trusts.

Mr. George Foulkes: On a point of order, Mr. Deputy Speaker. Is it in order for an hon. Member to go on at length on Third Reading about a clause which was neither discussed nor voted upon in the previous stages of the Bill's proceedings? Some of us are getting the impression that Conservative Members are going through the Bill in a somewhat tedious and prolonged way to try to delay the important Scottish business which is to follow. The hon. Member for Wells (Mr. Heathcoat-Amory) has hitherto not shown any great interest in the proceedings on the Bill. He seems now to have been dragged in by the Whips and by other Conservative Members as a device. I wonder whether you, Sir, could rule on whether it is in order for him to go on at such length about a clause which has not been discussed or voted upon.

Mr. Deputy Speaker: Order. Some of the earlier remarks of the hon. Member for Wells (Mr. Heathcoat-Amory) caused me a little concern. However, he is now referring specifically to a clause in the Bill—clause 61—and he is perfectly in order to do so.

Mr. Fleatheoat-Amory: I am sorry that my speech is being prolonged by interventions of Opposition Members. It is important that those outside the House should know that each clause gets a passing mention, either in Committee or in the House. That is why I am addressing myself to the important close company provisions.
I was explaining what a close company was. The legislation originated in the 1920s, when there was a considerable incentive for funds to be retained within close companies rather than distributed to shareholders. At that time, there was a great difference in the rate of taxation applying to registered companies, as they were known then, and individuals. Registered companies bore tax simply at the basic income tax rate, which was then mercifully low, whereas individuals could pay surtax at a very much higher rate. In addition, capital was either lightly taxed or not taxed at all. Therefore, there was every incentive to try to convert income to capital by retaining earnings within close companies. Quite naturally, the Revenue sought powers of direction so that earnings and profits in the companies could, in some circumstances, be taxed as though they had been distributed to shareholders.
I question whether those arrangements are appropriate today, for two reasons. First, before the war, a high proportion of British industry was owned and controlled by close companies, which were frequently owned by families or small groups of individuals. Therefore, the potential loss of revenue to the Exchequer was considerable. In the main, ownership has passed from close companies to public limited companies with hundreds or thousands of shareholders and the problem simply does not arise.
Secondly, the great difference in taxation as between companies and individuals is more or less ceasing to apply. The rates are now narrower. My right hon. Friend the Chancellor brought the rate of corporation tax down to 35 per cent. and the top rate of income tax down to 60 per cent. I hope and believe that in the next few years the

differential will narrow still further. Also, capital is now taxed at a higher rate particularly if assets are held through companies.
Over the years, there has been provision to bring some relief to close companies if they are engaged in trading, but the definition of trading is restrictive and somewhat arbitrary. I argue that the close company legislation is becoming obsolete. I urge that it should be replaced by a more general anti-avoidance provision to catch the artificial use of close companies set up for avoidance purposes alone.
I shall not discuss clause 61 any further. I simply wish to ask my right hon. Friends two related questions. Will they establish, first, how many close company apportionments have been made over the last year or two and, secondly, how much revenue has been raised as a consequence? If the answer to both questions is "small", I again suggest that, when the future course of close company legislation is considered, it might be thought desirable to sweep away much of the legislation governing close companies which remains on the statute books and to replace it with a much simpler anti-avoidance provision.
I should like to touch on the more general matter of tax reform. I hope that my right hon. Friends will persist: in their valiant efforts to simplify the British tax system. We have already achieved great success with corporation tax, bringing the rate down and reducing——

Mr. Blair: On a point of order, Mr. Deputy Speaker. It is becoming increasingly clear that we are seeing an undignified and unworthy exercise of the filibuster to prevent the Scottish debate from taking place early. In my respectful submission, Sir, it cannot be right that we are entitled to debate tax reform on Third Reading of the Finance Bill. I draw your attention to Hansard of 10 July 1985 when, on Third Reading of the Finance Bill, Mr. Deputy Speaker specifically ruled out of order a more general discussion on taxation. He said:
On Third Reading debate is restricted to what is in the Bill. Discussions at previous stages are not relevant. The discussions to which the hon. Gentleman refers are not relevant. Debate must be about the content of the Bill." —[Official Report, 10 July 1985; Vol. 82, c. 1231.]
We are extremely concerned that the proceedings of the House are being abused to prevent my Scottish colleagues from debating important matters which the Government are afraid to debate in prime time and thus want to keep back.

Mr. Deputy Speaker: I think that the whole House knows that the Chair is in no way involved with tactics which perhaps are being used at the moment and which are used from time to time on both sides of the House. The Chair is concerned only with whether the debate taking place is in order. I am satisfied that this debate is in order. The hon. Member for Wells (Mr. Heathcoat-Amory) is now referring to points which I believe he will direct to a series of clauses in the Bill under the heading "Taxes Management Provisions".

Mr. Foulkes: On a point of order, Mr. Deputy Speaker. I am astonished at your ruling on what you think the hon. Member for Wells (Mr. Heathcoat-Amory) is about to say. I have never heard that happen in the House before. I should have thought what was happening was clear. We have had a posse of parliamentary private secretaries put up deliberately to filibuster. I should have thought that the Chair should take account of that. The hon. Member for


Wells, who is speaking—when he is not interrupted—started this part of his speech by saying that he would now talk about the general matter of tax reform. I am sure that you heard him say that, Sir. It would be useful if you would rule whether the general matter of tax reform, as opposed to the specific reference in the Bill, is appropriate for Third Reading. It seems to some of us, especially those from beyond Hadrian's wall, that this is a deliberate abuse of the House. I hope that you will protect hon. Members whatever part of the country from which they come.

Mr. Deputy Speaker: I have already made it clear—I can add nothing further — that the hon. Member for Wells is perfectly in order in his remarks. It often happens that certain hon. Members wish to proceed to the next business. That has nothing to do with the Chair. The Chair's concern is to ensure that the debate is in order. I am satisfied that this debate is in order. I am beginning to deprecate a certain intention on the part of some hon. Members who appear to be leaning on the Chair. That is not tolerable, and I am not prepared to put up with it.

Mr. Foulkes: On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker: Order. The hon. Member has made his point of order.

Mr. Foulkes: I have another point of order, Sir.

Mr. Deputy Speaker: Order. The hon. Member has made his point of order, and I have answered it to the best of my ability. I hope that he will not prolong proceedings by persisting.

Mr. Robert Sheldon: On a point of order, Mr. Deputy Speaker. It has been held clearly in the past that the debate on Third Reading deals with what is in the Bill and its consequences and not with the alternatives to it, which one is perfectly able to debate either in Committee or on Second Reading. It has normally been held that the point of a Third Reading is to show the consequences of what is in the Bill and to consider whether it should be passed.

Mr. Deputy Speaker: The right hon. Member is a very experienced Member who has dealt with many Finance Bills. He will know that I have already ruled that some latitude is allowed on Third Reading of the Finance Bill as distinct from other Bills. That latitude is being exercised. In my judgment, it is within the normal rules that we apply in the House.

Mr. Heathcoat-Amory: This speech is becoming rather longer than I had expected, through no fault of my own. You are entirely right, Mr. Deputy Speaker. What is a Finance Bill if it is not a Bill to provide tax reform and to make changes to tax management? I was touching on that feature of the Bill. I was expressing my approval of the fact that the philosophy running through the Bill is fully in line with my right hon. Friends' earlier tax reform measures to make taxes simple, general in application, low and enforced. I have left "enforced" until last. It was mentioned in Committee—in fact, by the hon. Member for Sedgefield—that we had to be vigilant in not giving the Inland Revenue executive powers beyond what were absolutely necessary. One of the functions of the House is to put checks on the Executive if there were ever a danger of that. One reason why the Revenue's tax-gathering has

created resentment is that the Revenue has been used to levy confiscatory taxes. If we can achieve comprehensible, comprehensive and low taxes, that danger ceases to be so great. Lower taxes are not only good in themselves but lead to greater compliance.
I hope that my right hon. Friends will carry forward the watchwords of tax reduction and reform which we have seen at work in this Finance Bill and which I am confident will be a feature of future Finance Bills.

Mr. Donald Dewar: On a point of order, Mr. Deputy Speaker. I am sorry to rise during this debate, but I do so for certain reasons. On contemplation I was a little alarmed by the suggestion that my right hon. and hon. Friends were trying in some way to lean on the Chair. I hope that you will take our assurance that that was not the intention. But we are alarmed to some extent, and rightly so. by the way in which the House has been manipulated. I understand that that is not a matter for you and that you have to consider only what is in order, but my right hon. and hon. Friends' points were serious points about the latitude allowed on Third Reading and they are of some interest to the House.
As I understand it, you were making the point that there was a distintion between Third Reading of a Finance Bill and Third Reading of any other Bill. But the hon. Member for Wells (Mr. Heathcoat-Amory) made it unashamedly clear in one passage that he was going to discuss general tax reform. If that is in order, it is difficult to see the distinction between Second Reading and Third Reading of a Finance Bill. Whatever latitude has been allowed in the past, and judging by the quotation of a previous Deputy Speaker's ruling two years ago on a Finance Bill, it seems to me that a sharp distinction has been made between the Second and Third Reading of the Finance Bill. I wonder whether you can help me by defining the difference so that in future we shall know exactly where we stand.

Mr. Deputy Speaker: I am grateful for the first comments of the hon. Gentleman, which I gladly accept. I have said on a number of occasions already that debates on the Third Readings of Bills that are not Finance Bills must be strictly related to the contents of the Bills. It is also clear that the hon. Member for Sedgefield (Mr. Blair) helped me by readng from "Erskine May" the passage to the effect that Finance Bills are treated in a somewhat different manner in that a wider debate is allowed, but there must be a direct relationship to the clauses in the Bill. There have been one or two occasions when hon. Members have assisted me in keeping other hon. Members in order, but nothing that has happened so far is out of order. It is nothing to do with the Chair whether we should go on to the other business that is on the Order Paper. All the Chair has to do is to give to any hon. Member who rises the opportunity to speak on the matter that is before us. which is the Third Reading of the Finance Bill. As long as an hon. Member is in order, the Chair does and should call him. That is the position.
I am sure that any hon. Member who rises from now on will sense the feeling of the House, will recognise that the House does have other business to come to in due course, and, therefore, I am sure that hon. Members will be particularly careful to relate their remarks to the Bill before us.

Mr. Tim Boswell: I am pleased to join in the debate on the Third Reading of what remains a very substantial Finance Bill. I would like, first, to mention the excellent contributions in the maiden speeches of my hon. Friends the Members for Wyre (M r. Mans), Wanstead and Woodford (Mr. Arbuthnot) and Gedling (Mr. Mitchell) and the hon. Member for Oxford, East (Mr. Smith) who are swelling the ranks of those new Members who, like myself, have now made their maiden speeches.
In the spirit of what you have just said, Mr. Deputy Speaker. I have only one remark to make by way of preamble, and that is that I have the great privilege of having a very old friend who is now almost 100 years old who has a remarkable brain and interest in financial matters, whose simple test——

Mr. Foulkes: He cannot be a Tory.

Mr. Boswell: He is indeed a Conservative. His simple view of financial matters is to ask whether things are getting better or worse and whether Budgets and Finance Bills will make things better or worse. Neither he nor I have any doubt about the legislation now before us.
I did not participate in Committee on the pensions legislation. I am sure that it is broadly within the right lines and that it is doing, as Government Members hope to do, two things at the same time. The first is that at the top level it is pruning one or two fiscal anomalies that Labour Members, when they had the chance to prune, took no action on. The first of those is the top limit on lump sums. which I do not recall having been in the legislation in the past. The second is the new arrangement on the reinsurance to close for Lloyd's where, after what was an unduly harsh first proposal, a sensible and workable compromise has been achieved.
I now turn to the remarkable contribution made by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who has very much borne the heat and burden of the day on the issue and in particular has set out to establish one substantial point — that pensions are an important and central property right. That should be recognised as far as possible both in legislation and in practice. The closer we can approximate our legislation to that ideal, the better.
Although things are much improved in the Bill, there arc matters to be attended to. I notice, for example, that my right hon. Friend the Financial Secretary referred to additional voluntary contributions. I must declare my own interest. Not only do I benefit from the pension scheme here, but some of us carry over financial retirement annuities from previous self-employment. We are in a better position than a person with his own pension scheme that is supplemented by additional voluntary contributions. The Government might pay attention to that point in the future.
Profit-related pay is the most important part of the Bill. It is an important social development. Benefits should not simply be internal; they should benefit the whole economy by stressing productivity and giving greater flexibility in the labour market. Those are the strengths in it. If it transpires that this experimental scheme is not taken up, as perhaps some people expect, although I do not, it is appropriate to treat it as an experiment and to look for something else. It is entirely wrong not to try the experiment to see how it works in practice.
As I want to speak only for a few minutes, I would like to pose the question that has gone through my mind in the time that I have spent looking at those issues in the past and during the passage of the Bill and draw an analogy with the work of my right hon. Friend the Chancellor in another area of taxation because there is an underlying dilemma. In this case the Government have made the right choice, but it is right to recognise the dilemma. The dilemma is whether one goes for a regime of lower tax rates generally or for differential reliefs for particular purposes. When one looks at the success of the Government's proposals on corporation tax where differential reliefs have been unpicked and a lower rate introduced, it must give one pause to look at any proposals, such as the ones in the Bill, for additional differential reliefs, particularly when they are not available to employees in the public sector because, by definition, they are not in profit-making activities.
The Government have been right to bring forward those proposals because they have value for the whole economy as well as for those within the profit-related schemes. It is a seed-corn exercise. It follows on from the earlier seed-corn exercises, such as the share savings scheme, which has been a remarkable success with over 1,300 entrants to date.
If hon. Members on either side of the House are concerned about an excess pattern of reliefs, the way to defuse those excess reliefs is to get general tax rates down. The lower the tax rate, the less the differential between being in a tax-sheltered environment and paying the full rate. The time to get tax rates down is not tonight, but it is and will he again in the next Budget. Meanwhile, I am delighted to join Conservative Members in commending this imaginative and substantial Finance Bill to the House.

Mr. Conal Gregory: I welcome the opportunity this evening to discuss two or three pertinent points on Third Reading of the Finance Bill. It has been delayed somewhat because of the general election, and I am pleased therefore that the aspects of pensions and particularly profit-related pay should be considered in some depth. I am saddened that the Opposition, not for the first time, have chosen not to participate adequately in the debate. Nevertheless, Opposition Members will have the opportunity later to read in Hansard the golden words from Conservative Members.
The Green Paper forecast in the Bill confirmed that 20 per cent., or £3,000, of the pay packet could be related to the profit-related bonus to qualify. There are several advantages in that. First, it makes wages more flexible and, therefore, employment more stable. After all, in any recession it will provide a cushion for cost cutting rather than by redundancies. If the system is introduced for smaller companies in my constituency, especially on the trading estates, it will hind individuals together and they will feel an integrated part of their firm and the profit created. Secondly, the emphasis on giving employees a stake in their companies must lead to better industrial relations, encouraging employees to work harder and boost productivity. I will come to the related problem of overtime shortly. Thirdly, unemployment will be reduced. For that, above all other reasons, profit-related pay will be of merit.
My right hon. Friend the Chancellor has doubled the tax relief since the Green Paper of July last year so that the


limit of 20 per cent., or £3,000, whichever is the lower, will apply. That means that a married person on average earnings would qualify for tax relief to the extent of up to £6 per week or 4p off the basic rate of tax. That is no mean achievement.
This is no idle, theoretical concept. A number of companies have already successfully introduced profit-related pay and it is appropriate on Third Reading of the Finance Bill to pay tribute to the clearing banks which have introduced such schemes and to companies such as Boots, British Airways, Marks and Spencer, Sainsburys British Oxygen and Burtons, to name a few.
In relation to the moral and economic problem of overtime, companies which have profit-related pay will be able to overcome some of the difficulties. For instance, July is not the high season for the Post Office as it is for the farmer with his crops. Yet a great deal of overtime is being worked in the Post Office. If nationalised industries could introduce profit-related pay, those postmen and the engineers in major companies, such as British Rail, could share in the fruits of their extra work rather than working for time and a half or double time. The chairman of British Rail, which is a major employer in my constituency, is currently looking at ways to deal with subsidiary companies, such as Travellers Fare. A profit-related pay scheme would bring bonuses not just for management but for the employees, because they would benefit from the profits of the company rather than simply working for hourly or weekly pay.
A further growth sector of the economy is tourism, which is achieving 50,000 to 55,000 new jobs per annum. In this sector, too, there are major advantages in profit-related pay, not merely for major companies, such as Trusthouse Forte, Embassy and Grand Metropolitan, but for smaller enterprises such as the independent hoteliers in the Consort Hotel consortium. To achieve these benefits in smaller schemes, the Government might consider the possibility of a managing agency to deal with smaller companies.
I well understand that there are objections to profit-related pay and these need to be addressed before we agree to this imaginative and far-reaching Bill. The first objection is that there would be greater uncertainty of pay levels, but wages are already uncertain due to overtime, short-time working and piecework, so no further instability would be created and there would be greater employee involvement.
Secondly, some economists might suggest that pay is more closely related to profits and employees might therefore want more involvement in corporate decisions. I do not see that as a disadvantage. Like many of the companies which have already introduced profit-related pay, I regard that as a bonus. I am sure that any imaginative management would agree.
A third possible objection is that employees already on the payroll may seek to defeat the logic of the scheme by preventing further recruitment because it might result in a diminution of profit per head. That is a theoretical concept, but I do not believe that employees actually participating and keen to improve profitability would behave in that way.

Mr. Foulkes: Will the hon. Gentleman give way?

Mr. Gregory: I shall be happy to hear some words of wisdom from the Opposition.

Mr. Foulkes: During the hon. Gentleman's discourse on profit-related pay, my hon. Friends and I were contemplating how it might apply to Members of Parliament. What formula does the hon. Gentleman suggest? I should be happy for it to be based on one's electoral majority, but I doubt whether the hon. Gentleman would find that desirable. If the hon. Gentleman has any other suggestion, we should be interested to hear it. I am sure that you, Mr. Deputy Speaker, would not rule it out of order, in view of the generosity with which you have allowed the debate to proceed.

Mr. Gregory: I shall not be taken in by the hon. Gentleman's mischievous suggestion. I am sure that he, like me, wishes to return to the mainstream of Third Reading rather than unnecessarily delaying proceedings, which Conservative Members certainly do not wish to do.
Before that rather unhelpful intervention, I was referring to the third theoretical objection to profit-related pay. It has been suggested that existing employees may not wish new staff to come on to the books and thus to share in the profits. I believe that that is a false analogy and that if employees have the best interests of the company at heart as they will share in its profits up to the maximum that I have cited, they will be looking out for suitable employees and schemes to boost their enterprise.
In the 1930s and 1940s, as some of us know from our history books and others from experience, firms had suggestions boxes. We have moved a long way from there and profit-related pay provides tangible benefits for every stratum of a company. I therefore see great advantages in the scheme set out in the Green Paper and in the Bill and I commend it fully.

Mr. Quentin Davies: I begin by paying tribute to the masterly way in which my right hon. Friend the Minister has taken us through this excellent Finance Bill and to the parliamentary marathon that we had the privilege to witness from my hon. Friend the Member for Kensington (Sir B. Rhys Williams)—a marathon not without results—to which I shall return in due course.
As a new boy, I find it slightly strange that on Third Reading of a Finance Bill it is possible to conduct a debate without referring at all to what is surely the most important consequence of any Finance Bill—the fiscal stance enshrined in the Bill and enforced by it. It must be in the mind of every hon. Member that the current fiscal stance in this country has been extraordinarily felicitous. That lies behind a remarkable fact which I believe is unprecedented in our history or in that of any other country with which I am familiar. We have had unprecedentedly high rates——

Mr. Norman Hogg: On a point of order, Mr. Deputy Speaker. It is quite obvious that the hon. Member for Stamford and Spalding (Mr. Davies) has nothing to say. It is also quite obvious that Conservative Members have been dragged in to make speeches to delay the debate. From a previous role that I have played in the House, I know that you are an


extremely helpful Deputy Speaker who understands the procedure. In what way would it be in order for me to move the closure?

Mr. Deputy Speaker: Order. The hon. Member for Stamford and Spalding (Mr. Davies) is on his preamble at the moment. If he continues a wide preamble for more than a few more sentences—I was already sitting on the edge of the Chair — I shall pull him up. As the hon. Member for Cumbernauld and Kilsyth (Mr. Hogg) knows well, every hon. Member is entitled to a few sentences of preamble before he comes to the detail of his speech. The hon. Member for Stamford and Spalding is about to do that.

Mr. Hogg: Further to that point of order, Mr. Deputy Speaker. It seemed to me to be more of an amble than a preamble. The hon. Gentleman was ambling all over the place and not directing himself in any way to the Bill. In what way and in what manner that would be consistent with the Standing Orders can I move the closure of the debate; in other words, That the Question be now put?

Mr. Deputy Speaker: I am not prepared to accept that motion.

Mr. Hogg: With respect, Deputy Speaker, I was not seeking to move the closure of the debate but asking in what way it would be in order for me to do that as a member of Her Majesty's Opposition as opposed to a member of Her Majesty's Government.

Mr. Deputy Speaker: The hon. Member is an experienced parliamentarian. He knows that the Chair will never give a ruling on a hypothetical question. If, in the fulness of time, he were to move the closure, the occupant of the Chair would have to make a decision. If I have misunderstood him, I am sorry. I am perfectly prepared to accept that he did not move the closure and therefore that I did not refuse it. He will understand the signifance of that.

Mr. Dennis Canavan: Further to that point of order, Mr. Deputy Speaker. Will you accept a definite question from me rather than a hypothetical question from my hon. Friend? I should like to move the closure so that we may get on to more important business — the way in which this rotten Government are clobbering Scottish local authorities. All that the House is hearing are filibustering contributions from the Government who arc the Opposition in Scotland. I therefore move the closure of the debate.

Mr. Deputy Speaker: I regret to inform the hon. Gentleman that I am not prepared to accept that motion.

Sir Brandon Rhys Williams: Further to that point of order, Mr. Deputy Speaker. Would it not be right to say that in any Bill that is introduced on a Ways and Means resolution the Second Reading is an open-ended debate and there is no prospect of a closure? Am I right in saying that the same applies to the Third Reading and that a closure motion is not in order on a Finance Bill?

Mr. John Maxton: Further to that point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker: Is it the same point?

Mr. Maxton: Yes, Mr. Deputy Speaker. I inform the hon. Gentleman —I hope that you, Mr. Deputy Speaker,

will do exactly the same—that it is not the case on the Second Reading of a Finance Bill when the closure is moved by the Government.

Mr. Deputy Speaker: Order. The Chair has the onerous duty of deciding whether to accept a closure motion. Then, of course, it is for the House to decide whether it wishes to end a debate. The hon. Member for Falkirk, West (Mr. Canavan) moved the closure, and I have told him and the House that I am not prepared to accept it.

Mr. Davies: I shall complete my preamble in the course of one sentence. As I was saying, the fiscal stance in this country has permitted us to enjoy an unprecedentedly fast rate of growth and, at the same time, to maintain a remarkable degree of equilibrium in the balance of payments, between different sectors of the economy and, above all, between growth in consumption and in investment. That is a consequence of our fiscal stance.
It is no accident that a great deal of attention has been paid to two aspects of the Bill simply because they are the two aspects that are, first of all, conceptually and philosophically new and, secondly, because they are likely to have a significant effect on microeconomic behaviour. They are profit-related pay and pension provision. I am one of the many casualties of the present pension system, but since I do not expect to be able to profit from any improvement, I am not sure that, strictly speaking, I have any interest to declare this evening. However, by general consent, it is pernicious to discriminate against early leavers. It is not merely morally pernicious but exceedingly economically unsound, for the simple reason that one is discriminating against and penalising those who are mobile and those who take risks and subsidising those who play safe and stay put. That is completely contrary to the general philosophical thrust of the Government's economic policies that I am proud to support. Therefore, I was grateful for the assurance that my hon. Friend the Member for Kensington extracted from my right hon. Friend to the effect that the walls of Jericho might conceivably be inclined to move a little further.

Mr. Norman Hogg: On a point of order, Mr. Deputy Speaker. What have the walls of Jericho got to do with the Finance Bill? The House is being abused. We have heard one cliche after another. The hon. Member is pouring forth empty rhetoric, Deputy Speaker, and you are allowing it to happen. The time has come for this—[Interruption.]

Mr. Deputy Speaker: Order. I know that hon. Members, particularly from Scottish constituencies, wish to get on to the important matters that are on the Order Paper for later this evening. I distinctly heard the hon. Member who has the Floor say that he was addressing his remarks to profit-related pay and pension schemes. [Interruption.] Order. The hon. Gentleman is doing just that. I suggest that points of order are only prolonging the proceedings. I guarantee hon. Members who are keen on later business that I shall ensure that the remarks that are made by any hon. Member are directed to the business before us. I repeat the appeal that I have already made to those hon. Members who rise to remember that other business will come on later and that many hon. Members are anxious to speak on it.

Mr. Canavan: Further to that point of order, Mr. Deputy Speaker. Just a few minutes ago, I heard the hon.
Member for Tayside, North (Mr. Walker) whisper to his colleagues, "Keep it going, lads, keep it going." This is a deliberate filibuster to try to minimise the time for democratic debate of Scottish business. What are you going to do about it, Mr. Deputy Speaker? If you are not going to do anything about it, I will move a motion of no confidence in you as Deputy Speaker.

Mr. Deputy Speaker: Order. It is just as well that the Chair does not always hear everything that is said below the Gangway. All that I say to the House once more is that the sole job of the Chair is to ensure that speeches are in order. The speeches are in order, and if we had fewer points of order we might dispose of this business more quickly and get on to the Scottish business.

Mr. Davies: I do not know whether the walls of Jericho would have withstood the clamour from Opposition Members, but I am more than ready to do so to make what I believe to be a serious point about profit-related pay.
I was amazed to hear the remarks of the hon. Member for Sedgefield (Mr. Blair) on profit-related pay. If I understood him correctly— I apologise in advance if I did not—he said that he was not against profit-related pay, but he was against using fiscal incentives to induce it. That was close to a declaration of intellectual funk, because the issue is not whether we have profit-related pay with fiscal incentives or whether we have it without. The issue is whether we have profit-related pay with fiscal incentives or whether we do not have it at all.
The reason for that is simple: we are asking workers to accept a cost in the form of a risk attaching to a portion of their present earnings, and there is no reason why we should expect anyone to accept such a cost unless we offer a corresponding reward at the same time. In the long term, that reward will be effectively an equity stake in the profits of the company for which they work, and that will bring with it all the economic, psychological and social benefits to which much attention has been paid in the debate. But for the immediate term, there is no way that the workers or staff in firms will accept that a portion of their present earnings should be subject to uncertainty to which they are not now subject unless there is a countervailing inducement for them to accept it. The only other way in which profit-related pay could be introduced would be to expect the employer, while guaranteeing existing wages or salaries, to go beyond that and guarantee an element of profit, too. It is neither realistic nor desirable to expect employers to do that. If they did, they would significantly increase the cost of labour and thus reduce employment.
This issue must be faced fairly and squarely. It is regrettable that it has not been so faced by the Opposition. It is with great pleasure and enthusiasm that I support this provision in an excellent Finance Bill.

Sir Brandon Rhys Williams: I hasten to reassure you, Mr. Deputy Speaker, and the House, that I have only very brief remarks to make which arise directly out of the Bill as we have it before us on Third Reading.
In the 1986 Budget there was what I thought an objectionable proposal in regard to interest in possession trusts; and I sought to argue with my right hon. and hon. Friends at the time that it should be changed. I did not

succeed, but I would like to say how very gratified I am that the present Bill has been amended in precisely the way I had hoped.
When this year's Budget was announced, I did not agree with the proposed tax treatment of life assurance funds and, having had the good fortune to be selected to serve on the Standing Committee, I tabled an amendment to the Bill which would have had the effect of reversing what the Chancellor intended in his Budget speech. I am pleased to see that that provision has now been dropped in the Bill which is before the House—or at any rate significantly revised.
We were concerned about the reinsurance to close proposal affecting Lloyd's. There, too, I tabled an amendment in Committee just before the election, and it was already apparent that my right hon. and hon. Friends were ready to move on that subject. They are to be warmly congratulated on the way in which they have attended to the experts, and have now made significant changes. I believe that what is now in the Bill, so far as Lloyd's is concerned, is satisfactory all round. However, in accepting the amendments in Committee, my right hon. Friend the Financial Secretary agreed that further changes might be seen to be necessary and said that he would pay attention to the matter as time went by. That was extremely satisfactory and I should like to express my thanks for all those improvements.
On the question of personal pension schemes, which constitutes chapter II of the Bill, the Government are making a highly imaginative and important new move that should be welcomed in all parts of the House. I am sure that it is very welcome in the country. It is very much in line with my own recommendation over a long campaign. I wish the new movement towards personal pension schemes every possible success. However, I am sorry to say that in schedule 3 there are provisions which I do not think will help the Bill at all. I am sorry that the House did not agree that it would have been better if schedule 3 had been dropped.
In opening the debate on Third Reading, my right hon. Friend said that tax reform and the reduction of tax is a vital part of our overall strategy. I warmly endorse that and should like to add one more thing: we should make extreme simplification of the tax system for its own sake a particular party commitment. We should aim to make progress with that during the present Parliament. I certainly hope that we shall.
In the area of occupational pension schemes, there is a great deal of room for an extreme simplification of the rules. The occupational pension movement in the private sector is vitally important. It stimulates saving for retirement, which is probably the most important spring for a private capitalist system. Saving for retirement is the most natural thing for everybody. It should be encouraged by the Government so far as ever possible.
We also have a motive to see that occupational pension schemes provide a sufficient pension, so that people in retirement do not have to rely on the taxpayer through supplementary benefit. We are not yet doing enough in that direction. The result is that millions of pensioners have to rely on supplementary benefit, which is a sad state of affairs. Not enough is yet being done in this Bill to put that right.
We should run our occupational pension schemes so that they assist members of our property-owning democracy to make the best of their careers. They should


not find themselves anchored in funds from which they cannot move without making serious losses. They should be able to make their own choices of career in their own best interests—and that would be the best interests of the economy as well. Sadly, the provision in the Bill as it now stands will reduce the mobility of labour in precisely the area where it matters most, which is for senior executives in the closing years of their careers. Those people will now add it up and discover that it is far better to remain in the schemes that they are in, than to try to jump into new schemes and to negotiate themselves a satisfactory retirement benefit. That is a most unfortunate aspect of the Bill and it is something that the House must undertake to come back to very soon.
The provisions for the AVCs are highly complex. Many experts think that they are unworkable and I am bound to say that I think so too. The movement towards the AVCs, which we all applaud, is unfortunately being stymied by the very provisions that the Government have included in the Bill. I do not like to be critical, because I know that my right hon. Friend has his heart in the right place. That is why I am optimistic when making these remarks, because I am sure that he will listen to what I say — and also to what the professional people in the pension movement are saying extremely clearly.
I also do not like the provisions in regard to accelerated accrual. The Inland Revenue has got that wrong. It will hold employees in schemes instead of encouraging mobility; it is an unnecessary restriction on freedom, and a sign that the Inland Revenue has not done enough thinking about the tax-free lump sum.
On tax-free lump sums, the £150,000 limit is inexplicable. It cannot be justified. It is a form of discrimination against the better-off which is not based on any kind of logic. I hope that it will be removed very soon because it is the wrong approach to take.
Having voiced those critical thoughts, I do not want to say more except that, in general, this is an excellent Bill. Its major features are vitally important and progressive. The points that I have criticised can be put right and must be put right very soon.

Mr. John Greenway: I am grateful for the opportunity to speak once again on the Finance Bill. Some of us have spent long hours on these Benches dealing with these matters and it is slightly offensive for Opposition Members to talk about us being brought in to filibuster into the night when we had every intention of speaking in this debate this evening.
We have discussed many provisions in detail, and before I refer to the points that I wish to raise, I wish to join in the commendations made earlier of my hon. Friend the Member for Kensington (Sir B. Rhys Williams), my right hon. Friend the Financial Secretary and the hon. Member for Sedgefield (Mr. Blair). Sadly, for the first time during these proceedings, the hon. Gentleman has gone to take some refreshment. We have had interesting and detailed discussions during which there has not always been unanimity.
I wish to address primarily the pension provisions, particularly those affecting personal pensions and AVCs. Choice is certainly a central plank of Government strategy and the Bill introduces the third main area of choice available to individuals. We have had home ownership and share ownership and now the Government seek to widen

the choice in pensions. As someone who for the past 15 years has been involved in marketing pensions, I must say not only that I have an interest to declare, but that that is to be welcomed.
The question of tax relief on pension arrangements has figured greatly in our debates. One of the areas where I am most at loggerheads with my hon. Friend the Member for Kensington is in relation to the purpose of that relief. I hope that I am not doing him an injustice when I say that I do not agree that tax relief should be considered as a form of loan from taxpayers which is subsequently repaid when the pension benefits are eventually taxed. There is every justification for continuing with sensible tax advantages in pension provision.
From the employer's point of view, in this day and age we should regard the provision of pensions as every hit as important as the payment of salaries. No one would suggest that the payment of salaries should not be a tax-deductible item on company and business balance sheets. Equally, from the individual's point of view, it is sensible for us to encourage people to make provision for the future. My hon. Friend the Member for Kensington referred to the possible problem of the burden of retired people on future generations of taxpayers. The thrust of the Bill to a large extent prevents that. People are given every encouragement to provide for their retirement, so that, next century, millions of pensioners will not depend on the state.
We welcome and support the retention of tax advantages and the Government have a right to ensure that there is no major abuse of those tax facilities. They have introduced changes in the lump sum arrangements. We have had considerable and enjoyable discussions about why the figure should be £150,000, and by any measure that figure is substantial and generous. The Financial Secretary has assured us that that figure will not be eroded, and we take that assurance on board. Let us retain our tax advantages for pensions and ensure that we do not see abuses to the extent that it would put them in jeopardy.
Questions have also been raised about AVCs, accelerated accrual and certain aspects of the financial arrangements for retirement annuities, now changing into personal pensions. My right hon. Friend assured us that the door was not closed and that further representations on the practicality of putting these matters into practice can be made. I welcome that.
An interesting feature of this debate is that much of the comment has come from the Conservative Benches and some people——

Dr. Lewis Moonie: Especially in the past few hours.

Mr. Greenway: It has been apparent throughout the entire debate. Labour Members remind me of a football team that is three goals down, but keeps kicking the ball to their own goalkeeper.
When we debate pensions and future pension provision, people may ask about the significance of those measures in relation to people who are out of work or who are already retired. The Social Security Act 1986 and the personal pension proposals will bring flexibility to people who may be in work for periods of time or where one member of a family is a wage earner. Such flexibility is welcome.
Comment was made on the fact that clause 29 does not allow the aggregation of relevant earnings between husbands and wives. Surely that is right. We must encourage wives to make their own pension arrangements. People who are already retired must wonder about the effect of this debate on pensions. I was grateful for the earlier ruling of Mr. Deputy Speaker, who said that we may refer to the first Finance Bill, which was passed before some of us were fortunate enough to be Members of this House. I greatly welcome the imaginative approach that was contained in the first Finance Bill in relation to increased age allowance, especially for those over 80.

Mr. Blair: On a point of order. Mr. Speaker. The hon. Member for Ryedale (Mr. Greenway) has just said that he thought that Mr. Deputy Speaker ruled that the earlier Finance Bill, which this House passed before the election, could be referred to and its provisions discussed in relation to this Bill. I cannot believe that to be the case. I never heard Mr. Deputy Speaker say that and it seems wholly out of order.

Mr. Speaker: I was not in the Chair at the time, but the hon. Member for Ryedale (Mr. Greenway) must stick to this Finance Bill.

Mr. Greenway: I do not want to go against your ruling, Mr. Speaker, but in future Finance Bills I should like movement towards an increased age allowance.
One measure that was introduced in this Bill, but not in the same form in the previous Bill, is the capital gains tax treatment of life assurance companies. I share the welcome that my hon. Friend the Member for Kensington gave to the Government's change of mind in this matter. It may interest some of the Scottish Labour Members—I sympathise with them for having to wait to discuss their own business a little later—that that change of heart has been greatly welcomed by the Scottish life assurance industry, which has much to gain from the benefits of the measures in the Bill in relation to personal pensions.
The tax changes introduced during the past eight years have been radical and far-reaching, so much so that one is reluctant to over-egg the pudding by commenting on the measures contained in the Finance Bill. Nevertheless, it is absolutely clear that this Bill introduces fundamental changes in relation to the provision of pension benefits for future generations. I greatly support the Bill.

Mr. William Cash: The provisions in this Bill are, without doubt, some of the most important provisions that are likely to come before this Parliament. The notion of profit-related pay, which comprises clauses 1 to 17 of the Bill, is of exceptional importance for the following reasons. For many years it has been commonly accepted that the question of pay should be linked directly to the trade union negotiating machinery. Now at last, in the new environment created by the Government, pay will he related to the individual effort of the people in industry or services. That mirrors the mid-19th century, in the days when there was no income tax to speak of, and all that was gained by people in their respective industries and services was pay, wages and the profits of those who ran the businesses. The intrusion—welcome in many respects—

of the volumes of public expenditure that have been generated since the mid-19th century, particularly in the welfare state, has cast a great burden upon the state.
A consequence has been an increase of taxation. The consequence of clauses 1 to 17——

Mr. Foulkes: On a point of order, Mr. Speaker. Before you came in, some challenges were made about the irrelevance of speeches and the fact that they were out of order. The hon. Member for Stafford (Mr. Cash) is taking us back to the 19th century. That was well before the Bill was introduced, and it is out of order. Perhaps you did not hear everything that the hon. Gentleman said, Mr. Speaker, but I can assure you that everything that I heard in the past 30 seconds was out of order, and I hope that you will bring the hon. Gentleman to order.

Mr. Speaker: My record shows that the hon. Member for Stafford (Mr. Cash) has been speaking for about one and half minutes, but I imagine that if he referred to the previous century, it must have been a preamble and that he was drawing lessons from past experiences.

Mr. Cash: Thank you very much, Mr. Speaker.
The Bill proposes that the maximum amount of profit-related pay eligible for tax relief will be £3,000 or 20 per cent. of the total PAYE, whichever is the lower. I challenge the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) to dispute whether that is germane to the debate that is now in progress.

Mr. Foulkes: It is germane, but it is boring.

Mr. Cash: It is on the spot and it is in the Bill.
The limits that have been determined for the purposes of the Bill are rather on the low side. In a future Finance Bill, I should prefer it if we increased those limits because ever greater incentives will be required to develop enterprise and efficiency and to develop the economy to the level to which we aspire. Let me risk raising a matter that goes outside this country. We have much to learn from the incentive-based economy in Japan because the relationship between profit-related pay and incentives lies at the heart of enterprise in the modern world.
The proposals in the Bill are the very antithesis of the drab Socialism represented on Opposition Benches. The notions of profit-related pay and incentives, the drive for enterprise and the determination to improve the quality of our services and industries are represented by clauses 1 to 17.
The more we can increase the relationship between profit-related pay and industry and services, the more we shall be able to reduce the perks and other informal accruals of income that are not directly related to the performance of the person who is working on the shop floor or in the boardroom. Therefore, the provisions to ensure that there is a direct relationship between the work that is done by those on the shop floor or in management and the amount of money that they take away with them is greatly to be applauded. That is also related to the reductions in taxation.
The combination of the various factors ensures that there is a direct contact between work, pay and income. People have a direct incentive to enterprise, which is what we require as we move towards the end of the century. To some extent, I accept the strictures of the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) on my reference to the 19th century; but we must learn from the


experience of other countries. We must learn how to recreate enterprise in this country. These provisions are adequate and proper testament to the endeavours of this Government over the next five to ten years. There is no doubt that they are necessary and helpful and will play a large part in ensuring that the country stays on the rails and becomes more prosperous during the next 15 years.

Mr. John Redwood: I shall endeavour to speak without hesitation, repetition or deviation because I know that Opposition Members are worried about our motives for coming here tonight. I can assure them that I was not lassoed by a Whip or waylaid by a Minister. I came tonight because I sat through the Committee stage of the Bill and I want to make some points about what emerged. Opposition Members would be well advised to take a greater interest in how the Government put their hands in the nation's pockets; they might then find the electors more sympathetic to their cause.
On personal pensions, a number of good new clauses were moved and then withdrawn, particularly by my hon. Friend the Member for Kensington (Sir B. Rhys Williams). A serious point that the Government must recognise arises out of that debate. Money purchase schemes do not easily go together with final salary schemes. They offer many advantages that final salary schemes cannot offer the taxpayer, the fund manager or — most important of all—the beneficiary. For example, in a final salary scheme one cannot be sure how much tax relief will have to be given, and one has to be careful about the amount of tax relief and how the limits to be placed on it are defined. With final salary schemes, if the rate of inflation rose too high, the beneficiaries would be largely unprotected, in the way in which they were throughout the terrible inflation of the 1970s, when the widows and members of schemes in receipt of pensions were often wiped out by high rates of inflation and inadequate rates of increase or compensation from the scheme managers.
Similarly, those who seek to change jobs—we need job mobility in this country— often find it difficult to obtain a good deal from the pension fund that they are leaving or from the fund to which they are going. The Government have enacted many measures to improve these matters by inflation-linking the pensions up to a limit and improving the right of transferees. There is no doubt that the best guarantee of all for anyone is to have his own assets visible, under his own control and professionally managed—and that is exactly what personal pensions offer everyone. That is exactly what the money purchase type of scheme offers pensioners, within and without the large schemes run by employers. We are offering opportunities—[Interruption.] Opposition Members may knock or deride them, but the people are in favour of them; they want choice and better pensions, and these proposals go some small way to achieving that aim.
There are disappointments in some of the other provisions of the Bill. Why, for example, for capital gains tax, are we still left with this ridiculously complicated scheme of indexation? Why have the Government not taken the opportunity to remove the indexation provisions and increase the amount that is tax-free for those making gains? Alternatively, the Government could have scrapped the capital gains tax machinery and replaced it with a

speculators' tax—at income tax rates—on those making short-term gains. The Government have missed an opportunity, but I hope that they will seize it on another occasion.
I am disappointed that nothing has been done to tackle the problem faced by those on lowest incomes, particularly as they move from unemployment into employment, which is happening frequently and quickly now. They face benefit withdrawals and a higher proportionate rate of tax than is paid by those on the highest incomes. That anomaly should be redressed rapidly.
I welcome the profit-related pay proposals and hope that they will catch on and become a large expense. It is not before time that such measures have come before the House. We need more flexibility in pay. Profits are booming, industry's order books are full and industry and commerce are flourishing across most of the country, so many people will benefit from the Government's proposal. It will be an addition to their income and will introduce the flexibility that we need to take on prosperity and to generate new jobs. It is not a scheme for cutting wages; it is a scheme for improving our economic prospects. If large sums are given in tax relief, much of that money will buy new jobs and new activities, and the flexibility will strengthen the prosperity of the whole nation. That prosperity will spread—yes, even to Scotland, though Labour Members always seem to deny that Scotland could ever prosper. Prosper it will, and the Government's proposals will help.
This is a radical Government and there are modest and good radical measures in the Bill. I hope that this will not be the end of it. Cutting taxes is a good thing. Reduced tax rates bring in more tax revenue and can further speed the process by which the wheels of industry turn more rapidly and people get back into jobs, which is what we all sincerely wish to see.

The Paymaster General (Mr. Peter Brooke): We have had a good-humoured debate, with a powerful strand of continuity. My first pleasure in responding is to congratulate four admirable maiden speakers.
My hon. Friend the Member for Gedling (Mr. Mitchell) traded not at all upon his father who is also an hon. Member. At the risk of going back into the 19th century, some of us recalled that Mr. Gladstone described Austen Chamberlain's maiden speech as a speech to warm a father's heart.
My hon. Friend told us that his constituency was named after a rural deanery. The only rural dean whom I know to appear as a symbol in British literature appears in the poem by my namesake Rupert Brooke about the vicarage at Grantchester. The fact that a constituency is named after a rural deanery adds greatly to the knowledge of the House. My hon. Friend was both lyrical and practical and I know that the House will look forward to hearing from him again.
The hon. Member for Oxford, East (Mr. Smith) declared that he had recently lost his identity. His speech clearly demonstrated that he had refound it. The hon. Gentleman made a most workmanlike speech and it was impressive that, when speaking of the motor industry, hospitals in his constituency and the Oxford polytechnic, he demonstrated great familiarity with how those institutions work.
My hon. Friend the Member for Wyre (Mr. Mans) earned the affection of the House by the manner in which he spoke of his predecessor, Sir Walter Clegg. I had to do business with Sir Walter on further education and on VAT on take-away foods. It is clear that my hon. Friend the Member for Wyre will represent his constituency with the same closeness and effectiveness as was shown by Sir Walter, of whom we were all so fond. In a moment I shall come to what my hon. Friend said about profit-related pay.
My hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot) set the House an outstanding example because of the manner in which he spoke without notes. I dare say that this is the first time that the House has heard a maiden speech by an hon. Member whose father was present and another maiden speech on which my hon. Friend the Member for Wanstead and Woodford was congratulated by the grandson of one of his predecessors. It was a well-informed speech and we were grateful for my hon. Friend's discretion in leaving until next year those matters that require our further attention, and giving us a year in which to consider the points.
In a similar way my hon. Friend the Member for Beaconsfield (Mr. Smith) referred to draft clauses. My hon. Friend the Member for Wells (Mr. Heathcoat-Amory) raised a query on clause 61.

Mr. Blair: I join the Minister in his praise of the four maiden speakers. Their speeches were all of excellent quality and brought great lustre to the debate.

Mr. Brooke: I am grateful to the hon. Gentleman for those remarks.
My hon. Friend the Member for Wokingham (Mr. Redwood) gave a trailer and pointers for subsequent legislation.
There were continuing references to a power of mitigation in the speech by the hon. Member for Sedgefield (Mr. Blair), and I reassert that this matter will be reviewed in advance of next year's Finance Bill. Those who can sing "Abide with Me" in French will know that this is our dernier rendez-vous with the hon. Member for Sedgefield because he is moving to other pastures. I join my right hon. Friend the Financial Secretary to the Treasury in praising the hon. Gentleman for the way that he managed the Committee stage.
It is now 99 years since the first occasion on which someone played through a test match and carried his bat. He made only 26 runs in 47. The hon Member for Sedgefield made 104—if we do not count the schedules, which in any case are extras. The support that the hon. Member for Sedgefield received was thin.
Opposition Members voted against the Second Reading and were then conspicuously absent from the Chamber, though in the course of the last hour they have shown a late interest. In Committee, twice the number of Back Benchers spoke on the Conservative side as spoke on the Opposition side. Only four of the seven Opposition Back-Bench speakers were from the Labour party and three of those came in on the final day of the Committee stage. The opposition was constructively provided by my hon. Friends the Members for Beaconsfield, for Croydon, South (Sir. W. Clark) and for Kensington (Sir B. Rhys Williams).
I am told that the hon. Member for Sedgefield is to shadow my constituents in the City. It is a compliment to my constituents that he has been selected for that role. He raised a specific point on retrospection, about which he was quite right. My hon. Friend the Member for Dover (Mr. Shaw) also addressed clause 80. The hon. Member for Sedgefield was quite right in his reading of the Finance Bill provisions. Both clauses 62 and 80 effectively ensure that the benefit of a favourable decision for the taxpayer from the commissioners or the courts is not removed by the substantive provisions of the relevant clause. This aspect of those clauses follows well-established precedents. Successive Labour and Conservative Administrations have clearly thought it right as a matter of constitutional principle not to deprive a successful litigant of the fruits of his legal victory.
A substantial part of the debate was devoted to profit-related pay. The hon. Member for Sedgefield said that the employment effects apply only in a recession. I repeat that it is knowledge that one can cope with the recession that causes management to operate more effectively and competently during an upturn.
The hon. Member for Oxford, East raised the absence of rights of access to knowledge. The intention of the legislation is that solutions must be found within the business. There is intended to be no detailed blueprint. Instead, there will be the maximum freedom to tailor schemes to individual circumstances. It will be a truly voluntary arrangement, and we do not want "conscripted" volunteers.
A host of my hon. Friends supported that part of the Bill. My hon. Friend the Member for Northampton, North (Mr. Marlow) made a characteristically robust speech. My hon. Friend the Member for Crawley (Mr. Soames) addressed himself to the issue, as did my hon. Friend the Member for Daventry (Mr. Boswell), who spoke about differential reliefs. That issue demonstrates the importance that the Government attach to the Bill. My hon. Friend the Member for Dover asked for simple concepts and said that technical requirements should be uncomplicated. It is a paradox that we must have complicated legislation to produce a simple result.
My hon. Friend the Member for Stamford and Spalding (Mr. Davies) produced a powerful argument for tax relief. My hon. Friends the Members for Stafford (Mr. Cash), for Wells, for Winchester (Mr. Browne), for Wokingham and for Wyre participated in the debate. My hon. Friend the Member for Wyre was especially eloquent in speaking from his experience with the John Lewis trust on both participation and employment effects. I must correct my hon. Friend the Member for York (Mr. Gregory): the Bill adds 50 per cent. to relief and does not double it. I was grateful to him, however, for his analysis of the objections and his overcoming of them.
The hon. Member for Gordon (Mr. Bruce) asked about the forecast cost, a subject that was taken up in Committee. There is a chronological factor because so much of the relief is granted after the year in question. The material that accompanies the Bill refers to £50 million, but on a running relief basis it is a higher figure. The scheme is called profit-related pay because that is what it is. I understand the preference of the alliance to have flexibility of language, but we have described it as profit-related pay because, as I have said, that is what it is. It would be churlish not to welcome the support of the alliance on this occasion, and I was particularly gratified


to hear that it would be supporting the Government on Third Reading, as it did on Second Reading. When I was the Government's pairing Whip it was never always certain that that would happen.
The hon. Member for Banff and Buchan (Mr. Salmond) made a good speech in which he charged the Government with having certain motives in introducing various measures in the Bill, and he challenged what he described as our rhetoric. The motivation behind the Bill is exactly what we have always stated it to be. We wish to confer greater flexibility within the labour market and to make further improvements to the supply side of the economy.
I owe the hon. Member for Sedgefield one point on clause 13, on which we spent much time in Committee. The Institute of Chartered Accountants of Scotland was much milder in its language in drawing our attention to the issue of information powers than the hon. Gentleman or the hon. Member for Great Grimsby (Mr. Mitchell). The hon. Member for Great Grimsby implicitly described what I was doing, and certainly what the Revenue was doing, as "extending the circles of tyranny". I have returned to the Finance Act 1978, to which my hon. Friend the Member for Croydon, South referred in Committee, when he quoted an eloquent speech that I made during what was then the Bill's passage through Committee. I am sorry that he did not raise it when dealing with clause 71 because I would have replied to that debate.
In 1978, the Conservative Opposition's grouping in Committee included my right hon. Friend the Chancellor of the Exchequer, my right hon. and learned Friend the Secretary of State for Scotland, my right hon. Friend the Secretary of State for the Environment, my right hon. Friend the Minister of Agriculture, Fisheries and Food, my right hon. Friend the Lord Privy Seal, my hon. Friend the Minister for Health, my hon. Friend the Minister for Employment, my hon. Friend the Minister of State, Home Department, my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin), who was a Defence Minister, and the Minister of State for the Armed Forces. The then Conservative Opposition mounted those 10 right hon. and hon. Members while the hon. Member for Sedgefield was left to mount the opposition to this Bill himself.
The House will recall the observation of President Kennedy when Nobel prize winners dined at the White House. He said that it was the most distinguished array of human talent since President Jefferson had dined there alone. I pay that final compliment to the hon. Member for Sedgefield. Despite the array of talent that scrutinised the 1978 Finance Act, the legislation proposed then was exactly the same as that which we are introducing now. The Conservative Opposition mounted no objection to it in 1978. As the hon. Member for Great Grimsby tried to curdle the blood of the House by speculating on what we might have said had we been in opposition, I stress that we allowed exactly similar measures to find their way on to the statute book in 1978. We raised no objection on that occasion.
My hon. Friend the Member for Kensington is a one-man think tank outside the House and a one-man Panzer division inside it. He has been conferring new logic on the term "think tank". We had prolonged debates on the subjects that my hon. Friend raised and we shall continue our dialogue with him. Clearly one of his purposes was to identify allies in the House. He could have identified my hon. Friends the Members for Canterbury (Mr. Brazier),

for Stamford and Spalding and for Wokingham as allies, although my hon. Friend the Member for Ryedale (Mr. Greenway) was against him.
In much the same way as my hon. Friend the Member for Kensington, I was brought up at the knee of a Welsh mother. I make an allusion which some of those who came into the Chamber late will not have heard. I was brought up on a rhyme which went:
Joshua the son of Nun
And Caleb the son of Jephunneh
Were the only two who ever
Got through to the land of milk and honey.
Only two members of the shadow Cabinet served in Cabinet when the last Labour Government were in power. It is a compliment to my right hon. Friend the Chancellor that both of them in turn have been placed opposite him. I suspect that my right hon. Friend made many runs off the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). I await with interest to sec the performance of the right hon. and learned Member for Monklands, East (Mr. Smith). As my right hon. Friend the Financial Secretary said, we are now confronted by a shadow team of six instead of five — a fact that the Opposition disguised by separating the shadow Chief Secretary from the rest of the list, thus divorcing public expenditure formally from tax as they divorced it informally in the election campaign.
I shall pass from my references to what the French call the cabinet fantôme. Last week the Leader of the Opposition asked for an economic debate this week. The opportunity for that has not been taken during this debate, although the strength of the economy has been recognised by a number of my hon. Friends. Even the hon. Member for Oxford, East introduced the subject of the car industry, and I pay tribute to the strength that the car industry is demonstrating.

Mr. Foulkes: On a point of order, Mr. Deputy Speaker. Surely the Minister has finished his speech, yet he is still going on. Is that in order?

Mr. Speaker: Order. It is a very elegant speech, and I do not think that he has yet finished it.

Mr. Brooke: It is an index of and a testimony to the muscle of what there was in the Budget that this Finance Bill should have occupied us for as long as it did, enabling the hon Member for Sedgefield to produce the score that he has. As he differs from me in not having Scottish blood, he generously gave up the opportunity of making a final speech so that we could get on with the final business.
Twelve-and-a-half hon. Members—the hon. Member for The Wrekin (Mr. Grocott) has come back to the House —have made maiden speeches, and three of those were Scottish maiden speeches. There cannot have been a Finance Bill to which more Government supporters have paid a tribute on Third Reading than this one, and I commend it to the House.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 267, Noes 205.

Division No. 19]
[9.50 pm


AYES


Aitken, Jonathan
Arbuthnot, James


Alexander, Richard
Arnold, Jacques (Gravesham)


Alison, Rt Hon Michael
Arnold, Tom (Hazel Grove)


Allason, Rupert
Ashby, David


Amess, David
Ashdown, Paddy


Amos, Alan
Aspinwall, Jack






Atkins, Robert
Forth, Eric


Atkinson, David
Fowler, Rt Hon Norman


Baker, Nicholas (Dorset N)
Fox, Sir Marcus


Baldry, Tony
Freeman, Roger


Batiste, Spencer
French, Douglas


Beaumont-Dark, Anthony
Gale, Roger


Beith, A. J.
Gardiner, George


Bendall, Vivian
Garel-Jones, Tristan


Bennett, Nicholas (Pembroke)
Gill, Christopher


Benyon, W.
Glyn, Dr Alan


Bevan, David Gilroy
Goodhart, Sir Philip


Biffen, Rt Hon John
Goodlad, Alastair


Biggs-Davison, Sir John
Goodson-Wickes, Dr Charles


Blackburn, Dr John G.
Gorman, Mrs Teresa


Body, Sir Richard
Gorst, John


Bonsor, Sir Nicholas
Gow, Ian


Boscawen, Hon Robert
Gower, Sir Raymond


Boswell, Tim
Grant, Sir Anthony (CambsSW)


Bowden, Gerald (Dulwich)
Greenway, John (Rydale)


Bowis, John
Gregory, Conal


Boyson, Rt Hon Dr Sir Rhodes
Griffiths, Peter (Portsmouth N)


Braine, Rt Hon Sir Bernard
Ground, Patrick


Brandon-Bravo, Martin
Grylls, Michael


Brazier, Julian
Hampson, Dr Keith


Bright, Graham
Hannam, John


Brooke, Hon Peter
Hargreaves, A. (B'ham H'Il Gr')


Brown, Michael (Brigg &amp; Cl't's)
Hargreaves, Ken (Hyndburn)


Browne, John (Winchester)
Harris, David


Bruce, Ian (Dorset South)
Haselhurst, Alan


Bruce, Malcolm (Gordon)
Hawkins, Christopher


Buchanan-Smith, Rt Hon Alick
Hayhoe, Rt Hon Sir Barney


Budgen, Nicholas
Hayward, Robert


Burns, Simon
Heathcoat-Amory, David


Burt, Alistair
Heddle, John


Butcher, John
Hicks, Mrs Maureen (Wolv' NE)


Butler, Chris
Hicks, Robert (Cornwall SE)


Butterfill, John
Higgins, Rt Hon Terence L.


Carlisle, Kenneth (Lincoln)
Hill, James


Carrington, Matthew
Hind, Kenneth


Carttiss, Michael
Holt, Richard


Cash, William
Hordern, Sir Peter


Chapman, Sydney
Howard, Michael


Chope, Christopher
Howarth, G. (Cannock &amp; B'wd)


Churchill, Mr
Howell, Rt Hon David (G'dford)


Clark, Dr Michael (Rochford)
Hughes, Robert G. (Harrow W)


Clark, Sir W. (Croydon S)
Hunt, David (Wirral W)


Clarke, Rt Hon K. (Rushcliffe)
Hunt, John (Ravensbourne)


Conway, Derek
Hunter, Andrew


Coombs, Anthony (Wyre F'rest)
Irvine, Michael


Coombs, Simon (Swindon)
Irving, Charles


Cope, John
Jack, Michael


Cormack, Patrick
Jackson, Robert


Couchman, James
Janman, Timothy


Cran, James
Jessel, Toby


Critchley, Julian
Johnson Smith, Sir Geoffrey


Currie, Mrs Edwina
Johnston, Sir Russell


Curry, David
Jones, Gwilym (Cardiff N)


Davies, Q. (Stamf'd &amp; Spald'g)
Jones, Robert B (Herts W)


Davis, David (Boothferry)
Kellett-Bowman, Mrs Elaine


Day, Stephen
Kennedy, Charles


Devlin, Tim
Key, Robert


Dickens, Geoffrey
Kirkwood, Archy


Dicks, Terry
Knight, Greg (Derby North)


Dorrell, Stephen
Lamont, Rt Hon Norman


Douglas-Hamilton, Lord James
Lang, Ian


Dover, Den
Lawrence, Ivan


Dunn, Bob
Lawson, Rt Hon Nigel


Durant, Tony
Lennox-Boyd, Hon Mark


Eggar, Tim
Lester, Jim (Broxtowe)


Emery, Sir Peter
Lightbown, David


Evans, David (Welwyn Hatf'd)
Lilley, Peter


Evennett, David
Lloyd, Peter (Fareham)


Fallon, Michael
Lord, Michael


Farr, Sir John
McCrindle, Robert


Favell, Tony
Maclean, David


Fearn, Ronald
Mans, Keith


Fenner, Dame Peggy
Marshall, Michael (Arundel)


Field, Barry (Isle of Wight)
Martin, David (Portsmouth S)


Forman, Nigel
Michie, Mrs Ray (Arg'l &amp; Bute)


Forsyth, Michael (Stirling)
Miscampbell, Norman





Mitchell, Andrew (Gedling)
Speller, Tony


Monro, Sir Hector
Squire, Robin


Montgomery, Sir Fergus
Stanbrook, Ivor


Morrison, Hon C. (Devizes)
Stern, Michael


Neale, Gerrard
Stevens, Lewis


Neubert, Michael
Stewart, Allan (Eastwood)


Nicholls, Patrick
Stewart, Andrew (Sherwood)


Nicholson, David (Taunton)
Stewart, Ian (Hertfordshire N)


Nicholson, Miss E. (Devon W)
Stradling Thomas, Sir John


Onslow, Cranley
Sumberg, David


Page, Richard
Summerson, Hugo


Paice, James
Tapsell, Sir Peter


Parkinson, Rt Hon Cecil
Taylor, Ian (Esher)


Patnick, Irvine
Taylor, John M (Solihull)


Pawsey, James
Taylor, Matthew (Truro)


Peacock, Mrs Elizabeth
Temple-Morris, Peter


Porter, Barry (Wirral S)
Thompson, D. (Calder Valley)


Porter, David (Waveney)
Thompson, Patrick (Norwich N)


Portillo, Michael
Thurnham, Peter


Powell, William (Corby)
Townend, John (Bridlington)


Price, Sir David
Tracey, Richard


Raison, Rt Hon Timothy
Trippier, David


Redwood, John
Vaughan, Sir Gerard


Rhodes James, Robert
Viggers, Peter


Rhys Williams, Sir Brandon
Waddington, Rt Hon David


Riddick, Graham
Wakeham, Rt Hon John


Ridley, Rt Hon Nicholas
Walden, George


Ridsdale, Sir Julian
Walker, Bill (T'side North)


Rifkind, Rt Hon Malcolm
Waller, Gary


Roberts, Wyn (Conwy)
Ward, John


Roe, Mrs Marion
Wardle, C. (Bexhill)


Rossi, Sir Hugh
Warren, Kenneth


Rost, Peter
Watts, John


Rowe, Andrew
Wells, Bowen


Sackville, Hon Tom
Wheeler, John


Sainsbury, Hon Tim
Whitney, Ray


Scott, Nicholas
Widdecombe, Miss Ann


Shaw, David (Dover)
Wiggin, Jerry


Shaw, Sir Giles (Pudsey)
Wilkinson, John


Shaw, Sir Michael (Scarb')
Wilshire, David


Shelton, William (Streatham)
Winterton, Nicholas


Shephard, Mrs G. (Norfolk SW)
Wood, Timothy


Shepherd, Colin (Hereford)
Woodcock, Mike


Shersby, Michael
Yeo, Tim


Sims, Roger
Young, Sir George (Acton)


Skeet, Sir Trevor



Smith, Sir Dudley (Warwick)
Tellers for the Ayes:


Smith, Tim (Beaconsfield)
Mr. Richard Ryder and


Soames, Hon Nicholas
Mr. Alan Howarth.


Speed, Keith





NOES


Abbott, Ms Diane
Canavan, Dennis


Adams, Allen (Paisley N)
Clark, Dr David (S Shields)


Allen, Graham
Clay, Bob


Archer, Rt Hon Peter
Clelland, David


Armstrong, Ms Hilary
Clwyd, Mrs Ann


Ashton, Joe
Cook, Frank (Stockton N)


Banks, Tony (Newham NW)
Cook, Robin (Livingston)


Barnes, Harry (Derbyshire NE)
Corbett, Robin


Barron, Kevin
Cousins, Jim


Battle, John
Crowther, Stan


Beckett, Margaret
Cummings, J.


Benn, Rt Hon Tony
Cunliffe, Lawrence


Bennett, A. F. (D'nt'n &amp; R'dish)
Cunningham, Dr John


Bermingham, Gerald
Dalyell, Tarn


Bidwell, Sydney
Darling, Alastair


Blair, Tony
Davies, Rt Hon Denzil (Llanelli)


Blunkett, David
Davies, Ron (Caerphilly)


Boateng, Paul
Davis, Terry (B'ham Hodge H'I)


Boyes, Roland
Dewar, Donald


Bradley, Keith
Dixon, Don


Bray, Dr Jeremy
Dobson, Frank


Brown, Gordon (D'mline E)
Doran, Frank


Brown, Nicholas (Newcastle E)
Douglas, Dick


Buckley, George
Duffy, A. E. P.


Caborn, Richard
Dunnachie, James


Callaghan, Jim
Dunwoody, Hon Mrs Gwyneth


Campbell, Ron (Blyth Valley)
Eadie, Alexander


Campbell-Savours, D. N.
Evans, John (St Helens N)






Ewing, Harry (Falkirk E)
Maxton, John


Ewing, Mrs Margaret (Moray)
Meacher, Michael


Fatchett, Derek
Meale, Alan


Faulds, Andrew
Michael, Alun


Field, Frank (Birkenhead)
Michie, Bill (Sheffield Heeley)


Fisher, Mark
Millan, Rt Hon Bruce


Flannery, Martin
Moonie, Dr Lewis


Flynn, Paul
Morgan, Rhodri


Foot, Rt Hon Michael
Morley, Elliott


Foster, Derek
Morris, Rt Hon A (W'shawe)


Foulkes, George
Morris, Rt Hon J (Aberavon)


Fraser, John
Mowlam, Mrs Marjorie


Fyfe, Mrs Maria
Mullin, Chris


Galbraith, Samuel
Murphy, Paul


Galloway, George
Nellist, Dave


Garrett, John (Norwich South)
Oakes, Rt Hon Gordon


Garrett, Ted (Wallsend)
O'Brien, William


George, Bruce
O'Neill, Martin


Gilbert, Rt Hon Dr John
Orme, Rt Hon Stanley


Godman, Dr Norman A.
Parry, Robert


Golding, Mrs Llin
Patchett, Terry


Gordon, Ms Mildred
Pendry, Tom


Gould, Bryan
Pike, Peter


Graham, Thomas
Powell, Ray (Ogmore)


Grant, Bernie (Tottenham)
Prescott, John


Griffiths, Nigel (Edinburgh S)
Primarolo, Ms Dawn


Griffiths, Win (Bridgend)
Quin, Ms Joyce


Grocott, Bruce
Redmond, Martin


Hardy, Peter
Rees, Rt Hon Merlyn


Harman, Ms Harriet
Reid, John


Hattersley, Rt Hon Roy
Richardson, Ms Jo


Heffer, Eric S.
Roberts, Allan (Bootle)


Henderson, Douglas
Robertson, George


Hinchliffe, David
Robinson, Geoffrey


Hogg, N. (C'nauld &amp; Kilsyth)
Rogers, Allan


Holland, Stuart
Rooker, Jeff


Home Robertson, John
Ross, Ernie (Dundee W)


Hood, James
Ruddock, Ms Joan


Howarth, George (Knowsley N)
Salmond, Alex


Howell, Rt Hon D. (S'heath)
Sedgemore, Brian


Hoyle, Doug
Sheerman, Barry


Hughes, John (Coventry NE)
Sheldon, Rt Hon Robert


Hughes, Robert (Aberdeen N)
Shore, Rt Hon Peter


Hughes, Sean (Knowsley S)
Short, Clare


Illsley, Eric
Skinner, Dennis


Ingram, Adam
Smith, Andrew (Oxford E)


John, Brynmor
Smith, C. (Isl'ton &amp; F'bury)


Jones, Barry (Alyn &amp; Deeside)
Snape, Peter


Jones, Martyn (Clwyd S W)
Soley, Clive


Kaufman, Rt Hon Gerald
Spearing, Nigel


Lambie, David
Steinberg, Gerald


Leighton, Ron
Stott, Roger


Lestor, Miss Joan (Eccles)
Strang, Gavin


Lewis, Terry
Straw, Jack


Litherland, Robert
Taylor, Mrs Ann (Dewsbury)


Livingstone, Ken
Thompson, Jack (Wansbeck)


Lloyd, Tony (Stretford)
Turner, Dennis


Lofthouse, Geoffrey
Vaz, Keith


Loyden, Eddie
Wall, Pat


McAllion, John
Walley, Ms Joan


McAvoy, Tom
Warden, Gareth (Gower)


McCartney, Ian
Wareing, Robert N.


Macdonald, Calum
Welsh, Michael (Doncaster N)


McFall, John
Wigley, Dafydd


McKelvey, William
Williams, Alan W. (Carm'then)


McLeish, Henry
Wilson, Brian


McNamara, Kevin
Winnick, David


McTaggart, Bob
Wise, Mrs Audrey


McWilliam, John
Worthington, Anthony


Madden, Max
Wray, James


Mahon, Mrs Alice
Young, David (Bolton SE)


Marek, Dr John



Marshall, David (Shettleston)
Tellers for the Noes:


Marshall, Jim (Leicester S)
Mr. Frank Haynes and


Martin, Michael (Springburn)
Mr. Allen McKay.


Martlew, Eric

Question accordingly agreed to.

Bill read the Third time, and passed.

Rate Support Grant (Scotland)

The Secretary of State for Scotland (Mr. Malcolm Rifkind): I beg to move,
That the Rate Support Grant (Scotland) (No. 2) Order 1987, dated 5th May 1987, a copy of which was laid before this House on 11th May, in the last Session of Parliament, be approved.
The order has two purposes. The first is to reduce the amount of grant payable in respect of 1987–88 by £202·3 million and to determine revised grant payments accordingly. The grant reduction is the result of local authorities' planned overspending this year in comparison with the guidelines that they were given. The grant reductions are applied by a formula, which is explained in the order to those individual authorities which plan to exceed guidelines.
The second purpose of the order is to adjust the rate support grant payable to Scottish local authorities in respect of the previous financial year, 1986–87. The overall effect in relation to that year is a grant increase of £28·2 million.
The history of grant penalties in one form or another stretches back to the last Labour Administration. mention that not as a political point—[Interruption.] It is a political point, but it is not just a political point. I mention it simply to show that no Government can ignore the planned level of spending by local authorities. The detail of grant penalty arrangements has changed over the years. Under the present system, penalties are targeted precisely on those authorities which overspend in relation to guidelines.
Before I go any further, I should emphasise that I recognise the commitment and dedication of many local councillors, representing all parties and none, who give up their time to perform this essential local service. They are well served by committed and professional staff. The services that local authorities provide are important to the smooth running and welfare of our society.

Mr. John Home Robertson: This is sickening.

Mr. Rifkind: Even so, some uncomfortable facts remain and have to be faced. When my hon. Friend the Minister of State responsible for local government finance met COSLA recently they considered, among other things, trends in local authority spending in the past seven or eight years. There were several striking features.
First, while expenditure in 1986–87 was at the same level in volume terms as in 1978–79, for the current year it had leapt by an astonishing 2·3 per cent. in volume. Secondly, since 1978–79 expenditure in cost terms has increased by 18 per cent., indicating that inflation in local authority costs has been quite significantly higher than in the economy as a whole. There are alarming signs that the gap is again increasing.
Thirdly, reverting to volume, education expenditure, which forms such a high proportion of the total has declined, that is only to be expected as a result of demographic changes, but if we take out education spending, expenditure and other services have increased over the past nine years by over 10 per cent. in volume. Hon. Members on both sides will find these figures interesting and will understand why the Government consider that there is room for economy in local


government and room for accommodating expenditure and new priorities, if only existing expenditure programmes are rigorously examined. I fear that many councils are still to become fully aware that many ratepayers can ill afford the burdens that are being put upon them and that many business ratepayers find their local taxes a significant burden and penalty on their efficiency and capacity to create jobs.
The system of grant penalties remains a powerful, if regrettable, instrument to encourage local authorities to budget and to spend prudently. This is no time to reduce our efforts to keep local authority spending under control. Circumstances will, of course, change in April 1989 with the introduction of the new arrangements provided for in the Abolition of Domestic Rates (Scotland) Act 1987. Statutory control of the annual increase in non-domestic rates and replacement of domestic rates by the community charge give us an assurance of increased pressure for accountability that will allow us to abandon the grant penalty system.
I refer now to the Circumstances leading to local authorities' 1987–88 budgets. This time last year it seemed that the message was at least sinking in. Budgets for 1986–87 showed, as I have already mentioned, that volume spending was down to 1978–79 levels. I responded at that time by fixing provision for the current year at a realistic level of 1986–87 budgets, plus an addition for inflation, which was 3·75 per cent. There were subsequent additions to provision and to grant in respect of the teachers' pay settlement and one or two minor transfers of responsibility between central and local government. The level of provision and grant for the current year was such that, in general, Scottish local authorities should have been able to maintain their expenditure within guideline levels, avoiding grant penalties this year and with only modest requirements for rate increases. When budgets were reached for this year, the picture was sadly and disappointingly different.

Mr. Tony Worthington: Mr. Secretary of State, after a quick consultation on this side, we do not know what you mean by "volume spending".

Mr. Deputy Speaker (Miss Betty Boothroyd): Order. The hon. Gentleman will speak through the Chair, please.

Mr. Rifkind: I am happy to respond to the hon. Gentleman. I have said to the House that local authority expenditure increased in volume terms, by which I mean that the increase was not simply in cash but in terms of the total services that were provided to local communities, all of which had to be funded, if not by central Government, by ratepayers, either domestic or non-domestic.
The number of authorities which have budgeted within guidelines has decreased from 40 last year to 28 this year, though several more are only just over guideline. In total, Scottish local authorities have planned to overspend by £122·1 million or 3·7 per cent. Within these figures, there remains a hard core of authorities that spend well in excess of guidelines. Six authorities account for £112 million or 91 per cent. of this overspending, and only two authorities —Strathclyde and Lothian regions—for £83 million or 68 per cent.
I should now like to turn to the details of the order itself. The order falls into two parts. First, it reduces rate

support grant for 1987–88 for those authorities that have planned to overspend. The needs element of rate support grant has been reduced by £202·3 million. This reduction is concentrated entirely on the 37 overspenders.
These penalties are more severe than for 1986–87, as a straightforward reflection of the fact that public expenditure provision for this year was so much more generous. However, I should make it clear that penalties are revised on provisional outturn and authorities which have by then reduced or eliminated their overspends stand to recoup some or all of the grant that they are now losing. It is still very early in the local authority financial year, and there is still plenty of time for all authorities that have exceeded guidelines to take the necessary steps to reduce their expenditure. If they do, they will be acting clearly in the interests of their ratepayers, and I hope they will take heed. If Opposition Members have ratepayers' interests at heart, I hope that they will join me in advising those local authorities to revise their expenditure plans now. They have had full notice of our intentions since 11 May, and if they are prudent they will have been planning revised budgets since then.
On the second part of the order, the effectiveness of grant penalties is demonstrated by the returns of provisional outturn for 1986–87. At the budget stage, 40 authorities kept within guidelines and the total overspend was £117·6 million. Provisional outturns show that the number of authorities within guidelines has dropped to 38, but the total overspend has come down to £90·5 million. The effect of this is to bring penalties down from £125·3 million to £97 million—a saving of £28·3 million, which is being returned to local authorities.
Under the present system of local government finance, grant penalties play an important role. We inherited them from the Labour Government and have made them fairer and more effective. In the present system of local government finance, the disparity between those who pay rates and those who vote requires this form of constraint on local authority spending. The new system that we shall introduce from April 1989 will be designed to improve local accountability and to remove the need for such penalties. Meanwhile, we must work within the present system. I hope that authorities which have budgeted above guidelines will try to reduce their excesses and so reduce the burden on their ratepayers.
I commend the order to the House.

Mr. Donald Dewar: I congratulate the Patronage Secretary on the precision of his efforts. We are starting the debate at a rather more advanced hour than I had expected. I do not object to that. I merely remark in passing to the Secretary of State that the precedent will be remembered and will be very much in our minds as we consider the further management of Scottish business in the House.
In July last year, the Secretary of State appeared in the House to announce the total relevant expenditure for the following year and the rate support grant percentage. When he replies to the debate, will he say whether he expects to make a similar statement for the next financial year before the House rises for the summer recess? That would be convenient, and I wish to know whether that custom will be followed.
This order has been introduced on the know-nothing, learn-nothing, do-nothing principle. It is another


instalment in the war of attrition that has marked relationships between central and local government in Scotland under the Conservative Government. The policy is especially inappropriate in the aftermath of the general election. These have been tough times for the Secretary of State, and it would be churlish not to say that I welcome his presence in the House. He is a rare sighting in Westminster these days. The fact that it has been a tough time for him was brought home to me by the interesting article that appeared in the Glasgow Herald on 14 July. It was written by the hon. Member for Tayside, North (Mr. Walker), who was reduced in the cold aftermath of the general election results to lamenting the passing of the hon. Member for Southend, East (Mr. Taylor) and wishing that he was still in control of affairs in Scotland. Apparently, when the hon. Member for Southend, East was in charge of Conservative fortunes, it was all bright dawn. I can understand that, because they were the happy days when there were enough Scottish Tories even to find a Scottish Whip, which I suppose was some consolation. In view of that vote of no confidence from the last of the loyal. if I may so describe the hon. Member for Tayside, North, it might be appropriate to have a minute's silence for what used to be called, optimistically, the "Rifkind factor" in Scottish politics.
May I now deal with the outline of the arguments used by the Secretary of State and the order that is before us. There is not a shred of justification for the Government's determined pursuit of what is almost a private vendetta against local authorities. Tonight the Secretary of State is ripping another £200 million from council budgets. This is not an academic dispute. As hon. Members know, it is an attack on jobs and services. It is plain hypocrisy for Ministers to play the role of the ratepayers' champion when it is their policies that have done so much of the damage. Tory cuts in rate support grant cumulatively add up to more than £2,500 million over the past six years. Everyone in the House will be conscious of the difference that that would have made to the provision of services and to the average domestic rate bill in Scotland.
The policy that has given rise to the order is riddled with inconsistencies and is basically unjust. This year, the excess over guidelines in Scotland as a whole is 3·7 per cent., which is less than last year. However, the penalty ceiling has been raised from £1·10 for every pound over guidelines to £1·75. As hon. Members know, the end product is a penalty of £202 million against £118 million last year. What is the possible justification for a situation in which, when the excess over guidelines is reduced, the penalty increases in such a dramatic fashion? It is indefensible in principle and vindictive in impact.
I draw the attention of the House to one or two anomalies. Perhaps the Secretary of State will deal with them when he closes the debate. The first is that Lothian and Edinburgh districts are losing £51 million and £12·5 million respectively under the clawback. However, at the same time they are subject to individual action under section 5 of the Local Government (Scotland) Act 1966. Those orders will be debated in only a few hours' time. It seems a case of double jeopardy. I ask the Secretary of State why it was not possible to calculate their penalty under the clawback orders that we are considering on the certain basis that he knows that their rates and their expenditure will be reduced in any event. The effect of doing so would be a combined loss of about £64 million. When one allows for the £1·75 penalty for every pound

over excess, that would probably reduce to about £24 million. The right hon. and learned Gentleman has been pressed on this point before and said that he would consider it. Perhaps, typically, his consideration has come to naught and I press him again to say why it would riot be sensible and logical to take into account the reality of what is happening and to adjust the general clawback for Edinburgh and Lothian in the way in which I have suggested.
Everyone in the House, in local government and everyone who follows these arguments, knows that the guidelines on which this entire rickety ramshackle edifice is built are wholly arbitrary and bear no relationship to reality. Why should an authority such as Lothian lose £51 million when its expenditure in real terms is at exactly the level that it was in 1979? If we look at the situation, consider the orders and cast our minds back to consider the specific action to which a later order relates, the poverty of the Government's position becomes apparent. The Government's guidelines have risen by 152 per cent. since 1978–79. However, that is significantly less than the comparable authorities, the comparators, under the scheme which have been named by the Secretary of State to justify his action. We are entitled to ask the right hon. and learned Gentleman, "Why is Lothian, which is 7·4 per cent. over guidelines this year, an outrage that justifies summary execution, when a Tory administration in Lothian was in excess of 6·6 per cent. last year but was apparently a shinning example of good housekeeping?"
To go back to the general clawback, I advise the right hon. and learned Gentleman that it involves not only Lothian. Strathclyde's increase in guidelines over the 1986–87 budget has risen by 2 per cent., but it is to be penalised to the tune of about £94·5 million. However, it is not only a case of the big fish, although we could go through the larger authorities and roll up a chapter of disaster, embarrassment and difficulty that will inevitably strike the ratepayers. It is a question also of the clawback affecting the local authorities. I give as an example—I think it is fair, because of course it is not controlled by my political friends—Nithsdale district council, which is to be penalised under the order and docked about £395,000. That seems an extraordinary case.
The Nithsdale council budget for 1986–87 is £182,000 below the Scottish Office's assessment of its needs. It is one of five councils whose assessed need is above both its budget and the guidelines for the coming year. How does the Secretary of State justify that extraordinary position'? We know that the assessed need is carefully calculated. It is supposed to be a finely tuned instrument. It depends on the client group approach. On that basis Nithsdale has an assessed need of £3·644 million and its expenditure was £3·462 million. Therefore, we have what the Ministers might see as a model. However, the guidelines have been mysteriously reduced to £226,000 below budget and the result is that the hapless councillors are faced with having to lose £396,000 of grant.

Mr. Rifkind: Before the hon. Gentleman produces more tear-jerking comments, will he reflect on the penalty scheme applied by the Labour Government? Every local authority in Scotland was penalised, even if it was spending below its guidelines. Surely, compared with that, the present position is significantly improved?

Mr. Dewar: We welcomed the change in the system and, indeed, we pressed for it, as the Minister will remember,


so I make no apology. We can all improve. We do not like the system and we are entitled to draw attention to its unfortunate repercussions for this particular council and for the whole of Scottish local government. It is a bizarre nonsense and I do not believe that it stands rational examination.

Mr. Allan Stewart: Will the hon. Gentleman tell the House why it is that no fewer than 28 local authorities are on guideline for 1987–88? Will he commend authorities, such as Eastwood, which are on guideline and showing reasonable prudence?

Mr. Dewar: The hon. Gentleman has become more parochial every month and I am delighted to know that his boundaries are now entirely within the Eastwood district. Perhaps he will become so inward looking that he will disappear from view. I cannot help thinking that that would be a blessing.
The answer to the question is simple. Each local authority does what it thinks is right in its Circumstances. That is what it is elected to do. If some meet a particular guideline, that is their business and they calculate the advantages and disadvantages. If others see an advantage to their ratepayers and electorate in taking a different stance, that is their business. They should not be answerable to big brother at the Scottish Office, but should be answerable to the electorate at the ballot box when the time comes.
Nithsdale district council covers the constituencies of the Minister of State and the hon. Member for Dumfries (Sir H. Monro). I appreciate that the Minister is probably in a difficult position because of the clash between his constituency interest and his personal position as a Minister. However, I shall be interested to hear the hon. Member for Dumfries this evening say what he thinks about the remarkable raid mounted by his Front Bench colleagues on the ratepayers of his constituency. I hope that the tradition of independence, which should be alive in his breast, will be seen in the Division Lobby later.
This is not an abstract, academic matter or some private disputation between the Treasury and the town house. There is a considerable fallout from this £262 million clawback with jobs, services and ratepayers among the casualties. We cannot shrug it off. It is never painless when in the second half of the financial year one must finance substantial reductions in educational investment, cleansing services, home help services and in other areas. Never mind how one compromises, in the rate poundage or in the cuts in services, at the end of the day it is the electors of the district and the ratepayers who lose. Ministers know that, and it is the consequence of a deliberate policy on their part.
I have already referred to the fact that if we had held the rate support grant percentage at the 1981–82 level, it would have produced a further £2·5 billion for local

authorities in Scotland. Over recent years we have seen a relentless thrust of Treasury policy with no logic and no recognition of the difficulties of everday life in Scotland. Ratepayers have been constantly victimised and the life of local authorities made unreasonably difficult.
I have read the minutes of some of the recent exchanges between the local authorities and Ministers. My eye was caught by a passage recording the meeting between the Minister of State, Scottish Office and the Lothian regional council on 24 June. I presume it is an accurate minute as it was taken by the Minister's civil servants. Apparently, towards the end of the meeting, the Minister said:
Selective action was not taken on a political basis. The Government's proposals had to be approved by Parliament.
I do not know whether that was supposed to be a connected or an unconnected set of sentences. However, the idea that there is no political motivation in these orders will be greeted by widespread scepticism in Scotland.
I read those minutes on the very day that I read reports in the press that rates will be artificially forced up to make the poll tax more acceptable south of the border. We are considering orders that were laid on 11 May, just before the start of the election campaign. Those orders were laid two months earlier than was normal in previous years. I can only think, I think it is a reasonable deduction and I would be happy to go to any jury of my peers on the matter, that the orders were laid at that point because they were calculated to attract votes in seats such as Edinburgh, Central and Edinburgh, South. The results are now history.
We are also told that the orders must be approved by Parliament. I do not know what approval means, but I know that we will have one and a half hours in which to debate these weighty matters, largely because of the efforts of the Patronage Secretary. Under the rules of this House we will have no chance to amend the orders.
I believe that the Secretary of State has learnt nothing from the election result. His sustained attack upon local democracy has contributed to the present disastrous state of Tory morale and fortunes in Scotland. Ministers must learn that present policies are the political equivalent of banging their heads off a brick wall. A strategic retreat would be good for them and good for Scotland.
We all recognise that it is early days for this Parliament. However, I hope that some of the lessons will be learnt. I am glad to have the Minister's assurance that we shall not be faced with a re-run of these dreary orders next year. However, I deplore the reason the Minister advances for that assurance, the approach of the poll tax, which was both unwanted and unworkable.
With regard to tonight's charade, I note the Minister's point about parliamentary approval. We shall certainly divide against this order and the later orders during the course of the early hours of the morning. I have no doubt that the Minister will have the votes when the time comes, but precious few of those votes will come from Scotland. That fact offers some food for extremely hard thinking over the months ahead.

Mr. Nicholas Fairbairn: May I begin, Madam Deputy Speaker, by rejoicing in your appointment, congratulating you and wishing you well. I am sure that we are all delighted to see you in the Chair.
May I say to my friend, the hon. Member for Glasgow, Garscadden (Mr. Dewar)—[HON. MEMBERS: "Friend?"] He is a friend, although he does not sit on the Conservative Benches. The argument that the hon. Gentleman has advanced is so intelligent as to be unintelligible. The simple fact is that there are certain authorities that are determined to seduce their electorate by extravagance and that is what the motion is about tonight. Indeed, it was a Labour Secretary of State who was so appalled by the concept and habits of such seduction that he had to introduce penalties in the first place. Now there is a complaint that those who indulge in extravagance——

Mr. George Foulkes: The Solicitor-General in exile!

Mr. Deputy Speaker (Miss Betty Boothroyd): Order.

Mr. Fairbairn: It is argued that those who indulge in extravagance should, in some way, be forgiven. But let us ask a simple question. Why? In Scotland we have many regional and district authorities which happen to obey the rules of financial prudence, and as a result they do not suffer penalty.
The hon. Member for Garscadden claims that there is some message or excellence in extravagance by either Strathclyde or Lothian region, and that that is to be approved. Let us ask ourselves this question: assuming that it is a matter to be approved, upon what possible basis should any other authority not also be extravagant?
The hon. Member for Garscadden merely says that all those things will fall on the ratepayer. Of course they do, because under the present system, the greater the expenditure by any authority, the more the ratepayer pays and the more the person who does not pay rates spends it. That is how the rating system works, and the basis of the community charge—[Interruption.] I say on behalf of my hon. Friend the Member for Eastwood (Mr. Stewart), who has just left the Chamber, that if he cannot stomach the rubbish on Opposition Benches as long as I can, I can understand it. Opposition Members should not knock him. They should just look at themselves and comprehend how disgraceful they are.

Mr. Henry McLeish: Does not the hon. and learned Gentleman realise that the entire ranks of the Conservative party north of the border now represent the county of Perthshire? Will he give us an assurance that the Perthshire Conservative party is united?

Mr. Fairbairn: I was not aware of the fact that my hon. Friend the Member for Dumfries (Sir H. Monro) came from Perthshire, or represented it, or that my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton), the Under-Secretary of State, or that my right hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), the Secretary of State, represented Perthshire. If there is some reorganisation in which that is to be achieved in the hon. Gentleman's views, let him put them to the House.
My understanding is that in Scotland more Conservative Members of Parliament represent us than in

half of England, so do not let anybody for a moment imagine that we do not have a mandate. We are a United Kingdom Parliament with United Kingdom Members. We are discussing a political matter, in which two authorities and a few others have decided to try to buy votes by extravagance. That is what we are discussing tonight. The debate is about the fact that there are authorities which believe that by extravagance they can buy votes. Thai is what the community charge will put an end to. I believe that it is important that we should comprehend that in Scotland there are authorities that are willing to defy the Conservative Government and be extravagant because they believe that they can buy votes. It is right that we should use the law to prevent that, and right that we are changing the law, the whole system of payment so that that should never again be necessary.
Let this be understood by all about the community charge: it will never again be necessary to make an order like the one we are debating tonight, because every citizen will have an interest in ensuring that, say, Dundee district council does not pay for investigations into strip searches at Heathrow. We shall not erect memorials to Nelson Mandela. None of that nonsense, which has nothing to do with local authorities, will again be available, because the people of Scotland, England, Wales and Northern Ireland will have to judge whether they want to pay more for political nonsense or for the services that they receive. That is what the order is about, and let no one forget it.
If anyone ever says that Scotland is the guinea pig, he should know that we are not the guinea pig — thank goodness, we are once again, as we have been in so much law reform, the leaders and the persons of true principles —[Interruption.] Opposition Members may regard Scotland as some sort of colony. Let us remember that we allegedly lost the American colonies on the slogan, "No taxation without representation". The community charge will abolish an even more effete system— there will be no representation without taxation.

Sir Russell Johnston: Having participated in Scottish rate support grant debates for more than two decades, it is my view that one is entitled to some sort of special recognition. I associate myself with the remarks made about you, Madam Deputy Speaker, by the hon. and learned Member for Perth and Kinross (Mr. Fairbairn), who has thankfully sat down, and I am sure that I can rely upon'your benevolent intervention. Perhaps a small plaque in St. Andrew's house, discreetly floodlit, would be appropriate.
Rate support grant debates are different now. I am saying that for the benefit of new hon. Members. However, the fog that enshrouds such debates is still quite impenetrable. Only the right hon. Member for Glasgow, Govan (Mr. Milian) was ever able to penetrate the fog effectively. The fog has a different smell to it now: it has a more viscous feel than it had before. Now we have debates not only about what the Government will give, but about what they will take back. Debates about how much more the Government should bestow are certainly different from debates about how much less the Government should take away. Both types of debate are enveloped in exactly the same sort of hocus-pocus. They resound with trumpet calls about the splendour of local democracy. There was a wee touch of that from the Secretary of State tonight. He said that we are grateful,


blah, blah, blah. The tonal quality of the congratulations vary according to which party is in government and the local government situation. Likewise, plaintive wails about the need for greater efficiency, improved services and the importance of special cases resound around the Chamber.
We also have statistics. Already, the hon. Member for Glasgow, Garscadden (Mr. Dewar) has given us a fair blast of statistics, and more will undoubtedly follow. They will fall like confetti and disappear almost as quickly—in spite of the fact that they have been chiselled and honed with enormous care by all kinds of local authority finance departments.
At the end of it, one has a feeling of utter futility. It is not that these debates are intrinsically unreportable—they come at a time of day when they will not be reported anyway—rather, it is that this is the end of the line. No Government I have observed have, at this stage, any intention of paying a blind bit of notice to what is said. The sums have been done, decisions have been finalised, and the line has been drawn.
Time is pressing, so I should like to make four succinct points which are intended for posterity, which recognises the wisdom that the present denies.
First, I do not accept that it should have been necessary for the Government to move from indicative to mandatory expenditure guidelines. The move arose essentially from the Conservative Administration's reaction to the spending programmes of what I might describe moderately, as forceful ideologically Left-inspired councils. The Government did not face the basic reality, that such authorities were unrepresentative and that that logically meant electoral reforms and a sensible form of local taxation based on the ability to pay. That was the way in which to achieve accountability and an open, representative system. We do not have fairly representative local government or a just system of local taxation. The Government did not face that fact, but instead devised this clumsy, catch-all system which scooped up all kinds of unlikely authority.
The hon. Member for Garscadden quoted the example of Nithsdale, and the Secretary of State did not even blench. Skye and Lochalsh is not noted for its militant Marxism, but it is on the list. The Secretary of State does not need to look it up. It has overspent. The catch-all system has seriously reduced the local discretion of local authorities everywhere.
Secondly, the guidelines, which are described in this emollient "Emergency Ward 10" fashion as the "client group" approach, have never been clearly understood or debated—perhaps that was intended—and are uniformly seen as unfair. This year's guidelines allow for an increase in spending of 3·75 per cent., whch is well behind the inflationary costs that local authorities have had to bear. Those costs are about 6 per cent., so, even if we accept the principle on which the guidelines are proferred, they are clearly unfair.
We have just had an election and Tory candidates did not say, "We are standing to persuade you of the need to reduce the number of home helps," or, "We are determined to reduce social work cover," or, "Too much is being spent on the handicapped." No, they said that

local authorities must make ther own decisions on expenditure. That was nonsense and the debate shows it to have been nonsense.
Seventeen years ago I was a member of the Wheatley commission on local government reform. We were excited about what we recommended. There were bits and pieces that each member would like to have done in different ways, but the three politicians on the commission, the late Betty Harvie Anderson, Tom Fraser and I, were convinced that the report was a charter for greater local independence and the improvement of the right and ability of people to make decisions in their own communities. The order is not about that. In the particular and in its general intent, it sets back such moves, and the House should reject it.

Mr. Nigel Griffiths: It was a great honour to be elected to represent Edinburgh, South. I know that my constituents look to me to articulate their desire to reverse cuts in local spending, to defend our colleges and universities and to make provision for the sick, the disabled and the homeless in our fine city.
The 4,000 council house tenants in my constituency who are on the waiting list for transfers because they live in unsuitable houses and the 2,500 home owners who are waiting for repair grants want more Government and council spending, not less.
I address the House with some humility and deep sadness that a number of my dear friends are no longer with us to share in our success and to give me the wise counsel that I hope I have already profited from. My predecessor, the Earl of Ancram, was the hapless victim of his Government's policies. He was renowned for his efforts on behalf of his Ministry to ensure deregulation of the buses, increases in council rents and cuts in local services and their budget funding. He was also renowned for his powers of explanation, but when it fell to him to introduce and explain the community charge, the community charged into the polling booths and voted out him and 10 other Tory Members.
In the 1380s, the poll tax ruined the reputations of the Earls of Salisbury and of Hereford. In the 1980s it did for the Earl of Ancram. Yet still the Government seek to force the order through the House and to force chaos on local authorities and suffering on all those who depend on their services.
We are not dealing here with one or two maverick councils but with two thirds of Scotland's local authorities which have all found it impossible to supply statutory services within the budget laid down by the Secretary of State. Now this order seeks to cut spending by a further 3 per cent. Is it not enough that in my constituency schools are forced into composite classes, that disabled people are forced to join council house waiting lists for adaptations, and that the streets remain unswept because of lack of funds?
This latest order comes at the end of seven years during which the Treasury has slashed its contribution towards local services from 68 per cent. to 50 per cent. and has forced up rates accordingly. This withdrawal of funds has caused ratepayers to have to foot a bill of a staggering £2·5 billion. As the House will know from studying this order, five councils have been set budgets by the Secretary of State that are even lower than his own Department's estimate of their spending needs. This is not only an abuse


of power, it is an abuse of all logic. In this order, the Secretary of State stands condemned by his own Department.
The Department advised councils such as Annandale and Eskdale that they would need to spend more than £2 million to meet the needs of their populations. However, the Secretary of State has laid before the House an order requiring those councils to cut their spending below £2 million. Today the Government seek to penalise two thirds of Scotland's councils, but Ministers know that the game is up. That is why they have been ferreting around to try to find some sort of alternative. What have they come up with in this age of the computer? They have come up with the poll tax. They say that they want to make councils accountable, but this Government have left few services for which councils can be accountable. The next step will he the abolition of local councils and we know that the Government have plenty of experience in that.
If we look at the practicalities of the Government's scheme, we find that even though the legislation is now on the statute book, the Government still cannot agree on a figure for their poll tax. In May it was £250, in June it was £255 and just last week the figure was £289. Even this figure assumes 100 per cent. collection success. It assumes that the uniform business rate will not be held at a low level. and that the Government will increase their share of local authority spending to match inflation. No wonder nobody believes the Secretary of State, not even, I suspect, his Back Benchers.
It seems from the order that the Government are determined to continue with their attack on local councils. I warn the Government that no measure will be more unpopular than the poll tax — not the closure of local schools, the deregulation of buses, or the threat to the student grants. Some hon. Members, such as the right hon. Member for Henley (Mr. Heseltine) listened to the eloquent advice given in Dowell's "History of Taxation". It said of the poll tax:
Unfair and unpopular, it was eventually dropped as unsuitable to England".
Apparently it is not unsuitable to the colonies of Nyasaland and Scotland. Is there any independent body that can validate the Secretary of State's figures? The answer is that there is none. His figures have been repudiated by the Strathclyde business school, the planning exchange, the Convention of Scottish Local Authorities, the local government information unit and the directors of finance of local councils in Scotland. The Economist and the Financial Times think the poll tax is unworkable. It has been rejected by the National Federation of Self-Employed and Small Businesses Ltd., the Institute of Directors and the Church. It is hardly surprising that that is the Church's view as it supported a poll tax 600 years ago and the mob looted Lambeth palace and lynched the Archbishop of Canterbury.
I think that we are entitled to ask just who is supporting this medieval measure.

Mr. Nicholas Soames: We are.

Mr. Griffiths: There is no one except the medieval madam and her malevolent men. Those who are not familiar with the medieval period of history would do well to read the excellent notes prepared by Mr. Timothy Edmonds that are available in the Library and learn the lessons of history, including the civil disobedience, the riots and the hanging of the Chancellor of the Exchequer.
Conservative Members must ask themselves why, in the constituency of Edinburgh, South, where three out of four people own their own houses, where more people send their children to private schools than anywhere else in Scotland and where there are no large factories, did the electorate, for the first time in history, return a Labour Member. The people of Edinburgh, South rejected this divisive Conservative Government. They deplore the attack on local services and condemn the poll tax, and rightly so. Why should the widow pay as much as the wealthy, the council tenant as much as the count, the pensioner as much as the playboy? No, the pensioner and the disabled in my constituency, along with the tenant and the homeowner, all support local spending by local councils and reject decisively Government interference. The people of this country support their local councils and their local services. Sadly, the Government do not.

Mr. Henry McLeish: I am grateful for the opportunity to make my first speech in this Chamber, and pleased for a number of reasons. First, it is an honour to take part in the activities of a House that has such important traditions in history. Secondly, it is important for me to represent the views of my constituency on an important rate support grant order that has grave implications for jobs and services and for the democracy that is being exercised in Scotland. Thirdly, and most important, I wish to expose the Government's breathtaking hypocricy. At every turn they espouse the causes of freedom, independence and choice, but their every action in local government is designed to achieve the very opposite.
I hope that I bring to the House some pride and some passion. I bring the pride of my constituents, who want to see a good job done in the House. I bring also the passion that they are showing — the result of their anger and bitterness—in opposition to the Government's policy. More importantly, they feel that they have been treated contemptuously by Scottish Office Ministers.
I am sure that my predecessor, Willie Hamilton, would have shared the feelings that I have expressed about pride and passion. Willie Hamilton represented the seat that I have the privilege to represent for nearly 37 years. Some would say that he was a man of independent mind. He respected and represented the enduring traditions of the House. He was truly a parliamentarian, and I am sure that my right hon. and hon. Friends will accept that proposition.
My predecessor worked tirelessly for the people of my contituency. Outwith the House, in the Chamber and on Committees he worked for the Health Service and was a passionate advocate of the needs of nurses in particular. The causes that he espoused in relation to the Health Service and the needs of nurses are still germane to our environment today.
My predecessor also pursued passionately the lives and activities of a palace only a few yards from this Palace. I assure the House that I shall not be indulging in that pastime. But I take this opportunity to wish Willie Hamilton and his wife a long, purposeful and healthy retirement.
For those who do not know Fife, Central, I should explain that my constituency is situated in the east of Scotland, between the River Forth and the River Tay. By way of a benchmark for the future, I should say that I shall
return to the question of bridge tolls. Mine is one of the few areas in the United Kingdom which one pays to enter in the south and pays to leave in the north. I should like to have said much more about my constituency, but unfortunately we have had to suffer Conservative Members' filibustering on the Finance Bill, so the industry and qualities of my constituency will have to wait for another time.
I live in a constituency which has 19·6 per cent. male unemployment, but in the Government's terms it is now a reasonable figure. There are "only" 5,452 people who cannot find work, but those 5,452 people are chasing 192 vacancies. I say that in the hope that the Government will accept that the people of Scotland and of my area have yet to enjoy the benefits of the new economic horizons that are supposed to be opening up.
If ever there was a glaring example of the indifference and contempt in which the Government hold the people of Scotland, it is youth unemployment. I shall stress that point, especially in relation to my comments about local government. In 1979, when we had the misfortune to see the present Government elected, 857 16 and l7-year-olds in my constituency were unemployed or on special schemes. By 1983 that figure had jumped to 1,438 and it has now jumped again to 1,974. In case those figures do not speak eloquently enough about the dilemma facing young people in my constituency, I add that they are chasing seven vacancies. It is morally outrageous. When do the Secretary of State for Scotland and his team propose to address themselves to that problem?
In my constituency I have the good fortune to enjoy some of the best local government services in the United Kingdom —in spite of all the Government's efforts to undermine and attack them. I have had the privilege to lead Fife regional council for the past five years. Just to illustrate its excellence—a word that seems to be missing from the Government's vocabulary — I shall outline some of the services that are provided. With the help of Fife regional council we have spent over £2 million in the past year, with help from the private sector and the public sector banking agencies, not only on protecting but on creating jobs in my constituency.
We are in the fortunate position that 11,000 elderly and disabled people can travel free on public transport every day of the week, every week of the year. We are in the fortunate position that every four-year-old can go to a nursery school without having to pay fees or transport costs. Other areas seek to emulate that. There is also a free home help service for the many elderly and disabled who seek to improve the quality of their lives. Since the Disabled Persons Rights Bill on services for the chronically ill and disabled was thrown out last Session, the council has provided free colour television licences for those people. The local authority's jewel in the crown is the education system under which 98·5 per cent. of all children in Fife go to state schools, for the simple reasons that they are better than anything else provided and that people have a choice within the state sector and have exercised it in that important way.
Underlying all those individual achievements is not the fact that they are made by Fife regional council; they reflect the best that has happened in Scottish local government. It is incredible that I can make these comments at a time when the Secretary of State for

Scotland tells the House that those local authorities have been spendthrifts, careless and malicious and have sought to undermine the Government's public expenditure programme. The Government are so incensed about local government in Scotland because it provides services credibly and competently. It has mainstream policies. There are no frills or fringes in Scotland. More important, those policies are popular. Whether the Government like it or not, they should look at some of the opinion poll work done for the Widdicombe report and the Audit Commission which says that local government services nationally are much more popular than any services provided throughout Whitehall.
Equally important, local government is democratic and accountable. It is nonsense to describe the poll tax, for example, as a measure that will enhance local government accountability. We have accountability, which is reflected every year in, for instance, the central belt in Scotland where the people who support our policies return us in large numbers to carry on the good work that we have done for many years.
There is another feature which underlines what we are doing in Scotland which the Government Front Bench seems at worst to ignore and at best to absorb quietly. The use of collectively provided services, publicly funded, can enhance freedom, independence and choice. The Prime Minister is always talking about personal responsibility and self-sufficiency—the two qualities which lie behind the efforts of the Labour party in Scotland and many others to provide valuable local services. That is crucial to an understanding of where we are.
John Banham, the controller of the Audit Commission, who has now aspired to being the CBI's director general —not a resting place for aspiring Socialists— said:
The best of Local Government is better than the private sector and much better than … Whitehall at delivering services.
When reporting on the block grant distribution system, the Audit Commission said:
such a performance"—
in coping with targets—
is impressive testimony to local authorities' ability to manage under conditions of uncertainty.
One would expect that, after reeling off a catalogue of successes which reflect local government in Scotland, the Government would warmly welcome what we are doing and support us at every turn. Of course, that is laughable in relation to the order.
I should like to tell the House what has been happening over the past eight years under this Government. First, if they had maintained the level of grant at 68·5p as in 1979, we would have benefited from another £2 billion of rate support grant. Secondly, expenditure guidelines have become unrealistic and Government guidelines, instead of being indicative, have become straitjackets. To add salt to the wound, the Government have introduced a penalty system for overspending which is monstrous and which represents a tax on people, on progress and on quality in local government. If all of that were not enough. as my hon. Friend the Member for Edinburgh. South (Mr. Griffiths) said, we also now have the misfortune to face the poll tax. People in Scotland regard the measure as a joke —and I say that in the best intellectual fashion. It is a joke of an Act and it is about to become a joke of a Bill.
The Secretary of State for the Environment now wishes to impose a five-year transition period in England. Obviously he has not spoken to the Secretary of State for


Scotland because, after considering a transition period, he threw it out as being unworkable. The Secretary of State for the Environment will embark upon a community charge, a water charge, a sewerage charge, a unified business tax and also have the residue of a rating system over five years. I do not know who he is taking advice from, but clearly he must take better advice than from the Secretary of State for Scotland.
The Government's most recent local government Bill debated last week is also sinister because it not only poses a threat to 53,000 manual workers' jobs in Scotland as a result of contracting out, but also desires to gag local councils that seek to criticise or speak out against what is happening to them. Local government is at a crossroads in Scotland. We have given up the hope that hon. Members on the Government Benches will listen to what we are saying. I would like to think that they will take note not only of the election result in Scotland but of what people are saying about the continued contempt with which they hold the Scottish electorate. The Scots are very discerning, as I am sure other people throughout the United Kingdom are. We believe in dignity, decency and democracy, but those three qualities now have no place in the policies of the Government in Scotland.
It is also worth while reminding hon. Members on the Government Benches that they talk a lot about economy, efficiency and effectiveness, but I am sure that my right hon. and hon. Friends will want to talk about equality, excellence and democracy, which underpin any notion of liberty. Economic efficiency and social justice are the twin qualities that we are trying to pursue in local government and I would like to think that, with a proper and constructive environment, they can flourish.
It has been a privilege to speak for the first time, warts and all, in this Chamber. I should like to think that over the next two or three years I shall be able to discuss issues which affect my constituents.
Possibly the bad news for the Governent is that I am only the third member to be elected in my constituency in 50 years. We seem to last a long time. I sincerely hope that that quality will follow me for a few years.

Mr. Deputy Speaker: Mr. William Walker.

Mr. Bill Walker: Just so that we get the record straight, Madam Deputy Speaker, I am Bill Walker. I was elected to the Chamber as Bill Walker in three successive elections and I hope that the Hansard and other writers will note that. All the mistakes that were made by others were not made by me. [Interruption.] I am delighted that I have given the Opposition something to find interesting and amusing, because this is an evening that is important to Scotland and to all of us.
We have listened to two interesting maiden speeches. The hon. Member for Edinburgh, South (Mr. Griffiths) made what I would describe as a speech with conviction. I found it interesting, if at times I thought that it wandered some way from the debate. His introductory remarks about medieval history and the fact that he thought that Scotland was a colony will be well remembered. I have a little advice for him. He should be careful about what he says in the Chamber; it will be quoted at some later date. However, he will make interesting and important speeches on behalf of his party. No one can deny that he spoke with conviction. He seemed clearly to understand the function

of Labour local authorities in buying votes. He also seemed clearly to understand that he must watch the number of owner occupiers and those who pursue private education in south Edinburgh.
The hon. Member for Fife, Central (Mr. McLeish) made an excellent maiden speech, and I congratulate him on it. I congratulate him also on the fact that he wisely decided not to pursue a certain aspect for which his predecessor was known. There is no doubt that many hon. Members remember Willie Hamilton with affection. That fact may surprise some Opposition Members. Willie Hamilton was a good House of Commons man. It was sad that he damaged his opportunities and potential by becoming attached to one narrow area. I am pleased that the hon. Member for Fife, Central will not pursue that matter. We look forward with interest to his future helpful contributions. He understands that this is a Chamber for debate. It is a place in which different views are aired, and they should be listened to.
The comments by the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) were interesting. He looks forward to a plaque being erected. He was really saying that, after all these years representing his party, he is impotent. The fact is that he is. [AN HON. MEMBER: "Withdraw."] The hon. Gentleman and his party are impotent, whatever colours they may masquerade under today. I do not know whether the alliance is alive or whether alliance Members are against or for each other on different days. One thing is absolutely clear; in the final analysis—in the Division Lobbies—they cannot change anything. That fact was made clear in the hon. Gentleman's comments.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) referred to my article in the Glasgow Herald. He made his own observations about what lay behind the article. Let me make it quite clear that my right hon. and learned Friend the Secretary of State for Scotland is probably the most able, clever and talented Secretary of State that we have ever had.

Mr. Dennis Canavan: Give him a job, Malcolm.

Mr. Walker: But my right hon. and learned Friend knows that that does not mean that I will always agree with him 100 per cent.

Mr. Canavan: Take the job back, Malcolm.

Mr. Walker: I also advise the hon. Member For Garscadden that I believe that my right hon. and learned Friend will grace this Front Bench for many years ahead in many Parliaments. If the hon. Gentleman read my article—I imagine he did—he will know that I said this:
The Labour Party and the Scottish media can huff and puff about mandates and some Labour MPs may attempt to disrupt parliamentary business. What they cannot change is the mathematics within the House of Commons. Nor can they deny that all candidates in the General Election were standing for seats in the Parliament of the United Kingdom.
That is what this Parliament is. We all stood for election to it, and it is no good the hon. Member for Garscadden complaining in the Lobby about the results. I remind him that there are large areas of southern England where there are more than 16 million electors and only three Labour Members of Parliament. It is nonsense for them to come here and talk about mandates.

Mr. David Marshall: When will the hon. Gentleman say anything about the subject which the House is discussing—the cuts in rate support grant?

Mr. Walker: I always understood that it was in order to reply to what previous speakers had said. If Opposition Members do not understand what debate is, they should not be here. All that I have said thus far has related to what hon. Members before me said. I have referred to their speeches.
Now I will discuss the orders. I remind Opposition Members that when they stood for this Parliament, they understood that we would be passing rate support grant orders and other orders relative to local government. They also understood that, for many years, central Government have used a formula that was introduced by a Labour Government. They do not like the fact that the Conservative Government are attempting to redress the way in which Labour local authorities have bought votes, using ratepayers' and taxpayers' money, and they do not like the fact that, in their third term of office, the Conservative Government have introduced a system that will be fairer to and better for the people in their constituencies. It is important for them to recognize——

Mr. Canavan: The hon. Gentleman keeps using the term "bought votes". At the recent general election, the Tory party deliberately tried to buy the votes of the people of Scotland by means of a poll tax. They were decisively rejected by well over 70 per cent. of the Scottish electorate, to such an extent that the Tories are reduced to 10 Members in Scotland. How can the hon. Gentleman claim that he speaks on behalf of the people of Scotland? When it comes to the vote tonight, the majority of the elected representatives of the people of Scotland will be voting against the order, yet the sheep will come into the Lobby from Tory constituencies down south. They have not even listened to the debate, but they will come in and vote down the democratic wishes of the people of Scotland. What sort of democracy is that?

Mr. Walker: It is always a pleasure to give way to the hon. Gentleman because of the extravagant claims that he makes. Does the hon. Gentleman really believe that his voice is the only voice that speaks on behalf of Scotland? [AN HON. MEMBER: "Do you think you do?"] I did not say anywhere in my speech that I spoke on behalf of Scotland. I never made that claim. However, I certainly claim to speak on behalf of Tayside, North. That is the constituency that I represent and which returned me to this unitary Parliament. That is the constituency that recognises that I an hon. Member of this unitary Parliament and that in debates in this Chamber we are debating United Kingdom legislation — [Interruption] Scotland is not separate and is not independent. It is part of this unitary Parliament.

Mrs. Margaret Ewing: rose——

Mr. Alistair Darling: rose——

Mr. Walker: Opposition Members should understand —I repeat it for their benefit—that the Labour party, at local government level, have been buying votes with other people's money. That is why——

Several Hon. Members: rose——

Mr. Walker: That is why this legislation has been necessary. I never once had any difficulty about what the

hon. Member for Falkirk, West (Mr. Canavan) calls a poll tax. I was unaware that we had such a tax. I understood that I was standing for election on the basis of the community charge, and it is the community charge that I am happy to talk about.

Several Hon. Members: rose——

Mr. Walker: Let me make it quite clear to Opposition Members that the rate support provisions for 1987–88 are generous, however one views them, because they mean a 9·2 per cent. increase on previous years. With inflation running at its present level of about 4 per cent. it is obviously a generous apportionment. It is because the local authorities, in their wisdom, decided to increase their expenditure so substantially over that figure that the Conservative Government have had to do something about it, as Labour Governments had to do.
All I say to Opposition Members is that no one should be in any doubt that, when the community charge comes into place, we shall no longer be faced with the nonsense that now goes on at local government level — such as nuclear-free zones, on which vast sums of public money arc spent. Nor will we be faced with the 40 per cent. over-provision in Tayside schools, which affects all rural schools in the region. Until Tayside region decides to do something about that, there will always be such over-provision and over-capacity. That is why I have no hesitation in supporting my right hon. and learned Friend this evening.

Mr. Rifkind: I begin by offering my congratulations to the hon. Members for Edinburgh, South (Mr. Griffiths) and for Fife, Central (Mr. McLeish) on their maiden speeches. It would be difficult to describe them as having followed the convention of the non-controversial speech, but I happily recognise the force of their contributions and the sincerity with which they both spoke.
The hon. Member for Edinburgh, South referred to our former colleague, Michael Ancram; I hope that I speak for hon. Members of all parties in saying that he was a diligent Member of Parliament who made a major contribution to our debates. I have no hesitation in saying that I hope that it will not be long before he is again a Member of this House and able to make a contribution to its proceedings.
I listened with interest also to the speech of the hon. Member for Fife, Central. His predecessor, Willie Hamilton, was a man of strong convictions who, over many years, powerfully represented the interests of his constituency. I hope that the hon. Member for Fife, Central will forgive me for saying that I listened with amazement as he went through the many virtues of the local authority which he previously led and told us of the many marvellous provisions it could make for the people of Fife. The House will find it difficult to understand how a local authority which has allegedly been persecuted by this "uncaring" Government for the past eight years has with scarce and scant resources nevertheless been able to provide the marvellous services to which he referred, while not imposing intolerable burdens on the ratepayers. Clearly, the only explanation must be the generosity of the Government over the period in question. I am sure that the hon. Gentleman will continue to draw attention to that.

Mr. McLeish: Does the Secretary of State agree that it was through the extreme skill of the local authority in


resisting the Government's embraces for selective action over so many years and through the ineptitude of the Scottish Office that we have accomplished so much?

Mr. Rifkind: If Fife has shown that it is skill rather than resources that has enabled the local authority to meet the interests of its local people, the Government can take that into account when determining future rate support grant settlements.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) spent some time criticising the way in which the guidelines operate and the fact that authorities such as Nithsdale are subject to penalty. He will be well aware that the system that operates now is significantly better than that which operated under his party's Government. In those days when some local authorities overspent, all local authorities had to share the penalty that was imposed by the Labour Government, irrespective of their level of expenditure and of the circumstances that existed. The hon. Gentleman should have volunteered that observation rather than wait until it was extracted from him, if he wished to attach importance to it.
The hon. Gentleman asked whether it was reasonable that Lothian and Edinburgh should be subject to the general penalty. We are required to apply penalties on the basis of the budgets submitted by local authorities. Naturally, if local authorities, either because of selective action or for any other reason, reduce their expenditure during the course of the year, rate support grant is, indeed, repaid to them. That has happened in the past and will happen again.

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14 (Exempted Business):—

The House divided: Ayes 252, Noes 217.

Division No. 20]
11.30 pm


AYES


Aitken, Jonathan
Braine, Rt Hon Sir Bernard


Alexander, Richard
Brandon-Bravo, Martin


Allason, Rupert
Brazier, Julian


Amess, David
Bright,'Graham


Amos, Alan
Brooke, Hon Peter


Arbuthnot, James
Brown, Michael (Brigg &amp; Cl't's)


Arnold. Jacques (Gravesham)
Browne, John (Winchester)


Arnold, Tom (Hazel Grove)
Bruce, Ian (Dorset South)


Ashby, David
Buchanan-Smith, Rt Hon Alick


Aspinwall, Jack
Budgen, Nicholas


Atkins, Robert
Burns, Simon


Baker, Rt Hon K. (Mole Valley)
Burt, Alistair


Baker, Nicholas (Dorset N)
Butcher, John


Baldry, Tony
Butler, Chris


Batiste, Spencer
Butterfill, John


Beaumont-Dark, Anthony
Carlisle, John, (Luton N)


Bellingham, Henry
Carrington, Matthew


Bendall, Vivian
Carttiss, Michael


Bennett, Nicholas (Pembroke)
Cash, William


Benyon, W.
Chapman, Sydney


Bevan, David Gilroy
Chope, Christopher


Biffen, Rt Hon John
Churchill, Mr


Biggs-Davison, Sir John
Clark, Dr Michael (Rochford)


Blackburn, Dr John G.
Clarke, Rt Hon K. (Rushcliffe)


Body, Sir Richard
Conway, Derek


Bonsor, Sir Nicholas
Coombs, Anthony (Wyre F'rest)


Boscawen, Hon Robert
Coombs, Simon (Swindon)


Boswell, Tim
Cope, John


Bottomley, Peter
Couchman, James


Bottomley, Mrs Virginia
Cran, James


Bowden, Gerald (Dulwich)
Currie, Mrs Edwina


Bowis, John
Curry, David


Boyson, Rt Hon Dr Sir Rhodes
Davies, Q. (Stamf'd &amp; Spald'g)





Davis, David (Boothferry)
Lang, Ian


Day, Stephen
Lawrence, Ivan


Devlin, Tim
Lennox-Boyd, Hon Mark


Dickens, Geoffrey
Lightbown, David


Dicks, Terry
Lilley, Peter


Dorrell, Stephen
Lloyd, Peter (Fareham)


Douglas-Hamilton, Lord James
Lord, Michael


Dover, Den
Major, Rt Hon John


Dunn, Bob
Mans, Keith


Durant, Tony
Martin, David (Portsmouth S)


Eggar, Tim
Miscampbell, Norman


Emery, Sir Peter
Monro, Sir Hecto


Evans, David (Welwyn Hatf'd)
Montgomery, Sir Fergus


Evennett, David
Morris, M (N'hampton S)


Fairbairn, Nicholas
Morrison, Hon C. (Devizes)


Fallon, Michael
Neale, Gerrard


Farr, Sir John
Neubert, Michael


Favell, Tony
Nicholls, Patrick


Fenner, Dame Peggy
Nicholson, David (Taunton)


Field, Barry (Isle of Wight)
Nicholson, Miss E. (Devon W)


Forman, Nigel
Onslow, Cranley


Forsyth, Michael (Stirling)
Oppenheim, Phillip


Forth, Eric
Page, Richard


Fowler, Rt Hon Norman
Paice, James


Freeman, Roger
Patnick, Irvine


French, Douglas
Patten, Chris (Bath)


Gale, Roger
Patten, John (Oxford W)


Garel-Jones, Tristan
Pawsey, James


Gill, Christopher
Peacock, Mrs Elizabeth


Glyn, Dr Alan
Porter, Barry (Wirral S)


Goodhart, Sir Philip
Porter, David (Waveney)


Goodlad, Alastair
Portillo, Michael


Goodson-Wickes, Dr Charles
Powell, William (Corby)


Gorman, Mrs Teresa
Price, Sir David


Gow, Ian
Raffan, Keith


Gower, Sir Raymond
Raison, Rt Hon Timothy


Grant, Sir Anthony (CambsSW)
Redwood, John


Greenway, Harry (Ealing N)
Rhodes James, Robert


Greenway, John (Rydale)
Rhys Williams, Sir Brandon


Gregory, Conal
Riddick, Graham


Griffiths, Peter (Portsmouth N)
Ridsdale, Sir Julian


Ground, Patrick
Rifkind, Rt Hon Malcolm


Grylls, Michael
Roberts, Wyn (Conwy)


Gummer, Rt Hon John Selwyn
Roe, Mrs Marion


Hamilton, Neil (Tatton)
Rossi, Sir Hugh


Hampson, Dr Keith
Rost, Peter


Hannam, John
Rowe, Andrew


Hargreaves, A. (B'ham H'Il Gr')
Ryder, Richard


Hargreaves, Ken (Hyndburn)
Sackville, Hon Tom


Harris, David
Sainsbury, Hon T m


Haselhurst, Alan
Shaw, David (Dover)


Hayes, Jerry
Shaw, Sir Giles (Pudsey)


Hayhoe, Rt Hon Sir Barney
Shaw, Sir Michael (Scarb')


Heathcoat-Amory, David
Shelton, William (Streatham)


Heddle, John
Shephard, Mrs G. (Norfolk SW)


Hicks, Mrs Maureen (Wolv' NE)
Shepherd, Colin (Hereford)


Higgins, Rt Hon Terence L.
Shepherd, Richard (Aldridge)


Hind, Kenneth
Shersby, Michael


Hogg, Hon Douglas (Gr'th'm)
Sims, Roger


Holt, Richard
Skeet, Sir Trevor


Hordern, Sir Peter
Smith, Sir Dudley (Warwick)


Howarth, Alan (Strat'd-on-A)
Smith, Tim (Beaconsfield)


Howarth, G. (Cannock &amp; B'wd)
Soames, Hon Nicholas


Howell, Rt Hon David (G'dford)
Speed, Keith


Howell, Ralph (North Norfolk)
Speller, Tony


Hughes, Robert G. (Harrow W)
Spicer, Michael (S Worcs)


Hunt, David (Wirral W)
Squire, Robin


Hunt, John (Ravensbourne)
Stanbrook, Ivor


Hurd, Rt Hon Douglas
Stern, Michael


Irvine, Michael
Stevens, Lewis


Jack, Michael
Stewart, Allan (Eastwood)


Jackson, Robert
Stewart, Andrew (Sherwood)


Janman, Timothy
Stewart, Ian (Hertfordshire N)


Jessel, Toby
Stradling Thomas, Sir John


Johnson Smith, Sir Geoffrey
Sumberg, David


Jones, Gwilym (Cardiff N)
Summerson, Hugo


Jones, Robert B (Herts W)
Tapsell, Sir Peter


Kellett-Bowman, Mrs Elaine
Taylor, Ian (Esher)


Key, Robert
Taylor, John M (Solihuli)


Knight, Greg (Derby North)
Temple-Morris, Peter






Thompson, D. (Calder Valley)
Wheeler, John


Thompson, Patrick (Norwich N)
Whitney, Ray


Thurnham, Peter
Widdecombe, Miss Ann


Townend, John (Bridlington)
Wiggin, Jerry


Tracey, Richard
Wilkinson, John


Twinn, Dr Ian
Wilshire, David


Viggers, Peter
Winterton, Nicholas


Waddington, Rt Hon David
Wood, Timothy


Walden, George
Woodcock, Mike


Walker, Bill (T'side North)
Yeo, Tim


Waller, Gary
Young, Sir George (Acton)


Ward, John



Warren, Kenneth
Tellers for the Ayes:


Watts, John
Mr. Kenneth Carlisle and


Wells, Bowen
Mr. David Maclean.




NOES


Abbott, Ms Diane
Davis, Terry (B'ham Hodge H'I)


Adams, Allen (Paisley N)
Dewar, Donald


Allen, Graham
Dixon, Don


Alton, David
Dobson, Frank


Anderson, Donald
Doran, Frank


Archer, Rt Hon Peter
Douglas, Dick


Armstrong, Ms Hilary
Duffy, A. E. P.


Ashdown, Paddy
Dunnachie, James


Ashton, Joe
Dunwoody, Hon Mrs Gwyneth


Banks, Tony (Newham NW)
Eadie, Alexander


Barnes, Harry (Derbyshire NE)
Evans, John (St Helens N)


Barron, Kevin
Ewing, Harry (Falkirk E)


Battle, John
Ewing, Mrs Margaret (Moray)


Beckett, Margaret
Fatchett, Derek


Beith, A. J.
Faulds, Andrew


Benn, Rt Hon Tony
Fearn, Ronald


Bennett, A. F. (D'nt'n &amp; R'dish)
Fisher, Mark


Bermingham, Gerald
Flannery, Martin


Bidwell, Sydney
Flynn, Paul


Blair, Tony
Foot, Rt Hon Michael


Blunkett, David
Foster, Derek


Boateng, Paul
Foulkes, George


Boyes, Roland
Fyfe, Mrs Maria


Bradley, Keith
Galbraith, Samuel


Bray, Dr Jeremy
Galloway, George


Brown, Gordon (D'mline E)
Garrett, John (Norwich South)


Brown, Nicholas (Newcastle E)
Garrett, Ted (Wallsend)


Brown, Ron (Edinburgh Leith)
George, Bruce


Bruce, Malcolm (Gordon)
Gilbert, Rt Hon Dr John


Buckley, George
Godman, Dr Norman A.


Caborn, Richard
Gordon, Ms Mildred


Callaghan, Jim
Gould, Bryan


Campbell, Ron (Blyth Valley)
Graham, Thomas


Campbell-Savours, D. N.
Grant, Bernie (Tottenham)


Canavan, Dennis
Griffiths, Nigel (Edinburgh S)


Clark, Dr David (S Shields)
Griffiths, Win (Bridgend)


Clarke, Tom (Monklands W)
Grocott, Bruce


Clay, Bob
Hardy, Peter


Clelland, David
Harman, Ms Harriet


Clwyd, Mrs Ann
Hattersley, Rt Hon Roy


Cook, Frank (Stockton N)
Haynes, Frank


Cook, Robin (Livingston)
Healey, Rt Hon Denis


Corbett, Robin
Heffer, Eric S.


Cousins, Jim
Henderson, Douglas


Crowther, Stan
Hinchliffe, David


Cummings, J.
Hogg, N. (C'nauld &amp; Kilsyth)


Cunliffe, Lawrence
Holland, Stuart


Cunningham, Dr John
Home Robertson, John


Dalyell, Tarn
Hood, James


Darling, Alastair
Howell, Rt Hon D. (S'heath)


Davies, Ron (Caerphilly)
Hoyle, Doug





Hughes, John (Coventry NE)
O'Neill, Martin


Hughes, Robert (Aberdeen N)
Orme, Rt Hon Stanley


Hughes, Sean (Knowsley S)
Parry, Robert


Hughes, Simon (Southwark)
Patchett, Terry


Illsley, Eric
Pendry, Tom


Ingram, Adam
Pike, Peter


John, Brynmor
Powell, Ray (Ogmore)


Johnston, Sir Russell
Prescott, John


Jones, Barry (Alyn &amp; Deeside)
Primarolo, Ms Dawn


Jones, Martyn (Clwyd S W)
Quin, Ms Joyce


Kaufman, Rt Hon Gerald
Radice, Giles


Kennedy, Charles
Randall, Stuart


Kirkwood, Archy
Redmond, Martin


Lambie, David
Rees, Rt Hon Merlyn


Lamond, James
Reid, John


Leadbitter, Ted
Richardson, Ms Jo


Leighton, Ron
Roberts, Allan (Bootle)


Lestor, Miss Joan (Eccles)
Robertson, George


Lewis, Terry
Robinson, Geoffrey


Litherland, Robert
Rooker, Jeff


Livingstone, Ken
Ross, Ernie (Dundee W)


Lloyd, Tony (Stretford)
Rowlands, Ted


Lofthouse, Geoffrey
Ruddock, Ms Joan


Loyden, Eddie
Salmond, Alex


McAllion, John
Sedgemore, Brian


McAvoy, Tom
Sheerman, Barry


McCartney, Ian
Sheldon, Rt Hon Robert


Macdonald, Calum
Shore, Rt Hon Peter


McFall, John
Short, Clare


McKay, Allen (Penistone)
Skinner, Dennis


McKelvey, William
Smith, Andrew (Oxford E)


McLeish, Henry
Smith, C. (Isl'ton &amp; F'bury)


McNamara, Kevin
Snape, Peter


McTaggart, Bob
Soley, Clive


McWilliam, John
Spearing, Nigel


Madden, Max
Steinberg, Gerald


Mahon, Mrs Alice
Stott, Roger


Marek, Dr John
Strang, Gavin


Marshall, David (Shettleston)
Straw, Jack


Marshall, Jim (Leicester S)
Taylor, Mrs Ann (Dewsbury)


Martin, Michael (Springburn)
Taylor, Matthew (Truro)


Maxton, John
Thompson, Jack (Wansbeck)


Meacher, Michael
Turner, Dennis


Meale, Alan
Vaz, Keith


Michael, Alun
Wall, Pat


Michie, Bill (Sheffield Heeley)
Walley, Ms Joan


Michie, Mrs Ray (Arg'I &amp; Bute)
Wardell, Gareth (Gower)


Millan, Rt Hon Bruce
Welsh, Michael (Doncaster N)


Mitchell, Austin (G't Grimsby)
Williams, Alan W. (Carm'then)


Moonie, Dr Lewis
Wilson, Brian


Morgan, Rhodri
Winnick, David


Morley, Elliott
Wise, Mrs Audrey


Morris, Rt Hon A (W'shawe)
Worthington, Anthony


Morris, Rt Hon J (Aberavon)
Wray, James


Mowlam, Mrs Marjorie
Young, David (Bolton SE)


Mullin, Chris



Murphy, Paul
Tellers for the Noes:


Nellist, Dave
Mrs. Llin Golding and Mr. Robert N. Wareing.


Oakes, Rt Hon Gordon



O'Brien, William

Question accordingly agreed to.

Resolved,
That the Rate Support Grant (Scotland) (No. 2) Order 1987, dated 5th May 1987, a copy of which was laid before this House on 11th May, in the last Session of Parliament, be approved.

Rate Reduction (Lothian Region)

The Minister of State, Scottish Office (Mr. Ian Lang): I beg to move,
That the Rate Reduction (Lothian Region) 1987–88 Report, a copy of which was laid before this House on 10th July, be approved.
The report was laid before the House in accordance with the provisions of section 5 of the Local Government (Scotland) Act 1966, as variously amended, which affords my right hon. and learned Friend the Secretary of State power to propose a reduction in any authority's rate, if he is satisfied that the authority's total estimated expenses are excessive and unreasonable. The power for the Secretary of State to act where he detects "excessive and unreasonable" expenditure dates back over 50 years, and the use of the power in its present form is familiar to hon. Members. The report now before the House states the amount of the reduction proposed and the reasons for that amount, and sets out representations from Lothian regional council, together with the record of the meeting that I had with representatives of the authority.
For the sake of completeness, let me mention here that my right hon. and learned Friend also initiated action under section 5 against Edinburgh district council and Clackmannan district council. We shall debate the report concerning Edinburgh later. In the case of Clackmannan, my right hon. and learned Friend proposed a reduction in the council's rate on the grounds of its excessive and unreasonable planned expenditure. After considering representations from that authority, he agreed to its proposal to make a voluntary reduction in its rate of an amount less than was originally proposed. That represents a satisfactory outcome in Clackmannan's case, and for that reason there is no report before the House tonight concerning that authority.
I start with the broader context of our policies on local authority expenditure as a whole, which formed the background to the reports. What Scottish local authorities spend accounts for 43 per cent. of the programme of public expenditure in Scotland for which my right hon. and learned Friend is responsible. In the United Kingdom as a whole, local authority expenditure accounts for a quarter of public expenditure. There is nothing particularly untoward about those figures, but they are highly significant in the context of the Government's economic policy as a whole. That was well understood by the Labour party when it was in Government.
Quite apart from macro-economic considerations, we have to bear in mind the interests of individual ratepayers. They do not understand why, when they see inflation increasing by 3 per cent. or 4 per cent. and their own annual incomes increasing by 5 per cent. or 6 per cent. local authorities should find it necessary to produce budgets requiring rate increases several or many times higher than that. They can find no explanation in the quality of services that local authorities offer them. In many cases, ratepayers simply cannot afford those increases. That is equally true of domestic ratepayers, many on low or fixed incomes, and of business and commercial ratepayers on whose profitability we depend for the maintenance and creation of employment.
Last year, for a brief moment, it appeared that local authority current spending was coming under control. The

volumne of current spending by Scottish local authorities in 1986–87 was back to the level of 1978–79. Miraculously, services were not collapsing. In fact, taking account of reductions in demand for education — which itself accounts for around 50 per cent. of local authority expenditure—the volume of expenditure or many other services had increased. But I do not wish to make too much of that point. In overall terms, expenditure volume was back to its 1978–79 level. My right hon and learned Friend responded positively and constructively with a rate support grant settlement for this year, based realistically on local authorities' own budgets for 1986–87, with an increase of 3·75 per cent. in provision in line with inflation. There were further additions in respect of the teachers' pay settlement and some minor transfers of functions. Yet when local authority budgets for 1987–88 became available, it was clear that planned spending was again leaping ahead. Budgets for this year are 3·8 per cent. above even the generous level of provision that was made; and they imply an overall growth in the volume of expenditure of 3·2 per cent. As has also been pointed out earlier this evening, there are worrying signs that inflationary pressures are increasing in the local authority sector at a time when they are still under reasonable control in the economy as a whole. No responsible Government could ignore developments of that kind, and we have already discussed the grant penalties that will apply to all overspending authorities. The Secretary of State's responsibilities in relation to his powers under section 5 of the 1966 Act relate, however, not only to the need for public expenditure control, but to the need to protect local ratepayers from the consequences of excessive and unreasonable decisions by individual authorities.

Mr. George Foulkes: The Minister is talking blandly about statistics, in the bland manner that he has perfected over The years, but does he not realise that we are talking about services to individual people? For example, recently 150 parents turned up in Ayr, including people from Kincaidston in my constituency, asking for the provision of nursery services for young children aged three and four. Those services cannot be provided in Ayr because of the Government's cutbacks. What does the Minister say to people who are anxious to have services provided in Ayr as they are in other parts of the country?

Mr. Lang: No one would ever describe the hon. Gentleman as bland. We are also talking about services that have to be paid for, by individual anti commercial ratepayers.
I turn now to the particular Circumstances arising in Lothian. I very much regret that the Government are once again in conflict with Lothian. Its assessed need for the present financial year is £362 million. But its budget for last year was £371 million. The council was therefore given a guideline of £395 million for the present year. This was 8–9 per cent. above its assessed need and no less than 11·3 per cent. above its previous guideline. One might reasonably have expected some criticism for that guideline from those who felt that Lothian's expenditure was already too high. It was undoubtedly a generous figure, but it did not seem realistic to expect the council to make substantial reductions in the present year. In the light of that good guideline it was therefore most surprising and deeply disappointing that the region budgeted to spend no


less than £424·4 million, 7·4 per cent. or £29 million over its guideline, and 16·9 per cent. or £61 million over the assessment of its relative expenditure need. The next highest excesses among regional councils are 4·2 per cent. over guideline and 8·4 per cent. over needs assessment. If we look at a different measure, expenditure per head, Lothian's planned figure for 1987–88 of £533·99, is 4·9 per cent. above the average for closely comparable authorities, and the growth in planned expenditure per head over the previous year is 6·3 per cent., which is above the average corresponding figure for all regional councils.

Mr. Tam Dalyell: When the Minister speaks of closely comparable authorities, which authorities does he have in mind?

Mr. Lang: Comparable authorities among the regions are those that have similar responsibilities to those of Lothian. They include Central, Fife, Grampian and Tayside.
Looking at the figures in real, or volume terms, the rate of growth from 1986–87 to 1987–88 is 6·2 per cent., almost double the average for all regional councils and for all Scottish local authorities.

Mr. Gavin Strang: Will the Minister accept that expenditure per head in the Lothian region is less than average expenditure per head in the regions of Scotland as a whole?

Mr. Lang: It is always possible to find something to suit the hon. Gentleman's case, but expenditure per head in Lothian has been rising rapidly. Indeed, if one looks back to the 1978–79 comparison, to which the council itself looks back in support of its arguments, it overlooked the fact that expenditure then was 10 per cent. more than that of closely comparable authorities, and 3 per cent. above the regional average.
The figures are clear, and the extent to which Lothian stands out among regional councils is also clear. Take any number; double it; treble it — that seems to be the approach of Lothian regional council. It will not do. Lothian's rate has gone up 29·8 per cent., and there is a clear expectation among Lothian's ratepayers that something will be done about it. Parliament clearly intended the Secretary of State to use his powers under section 5 in Circumstances such as this, and my right hon. and learned Friend has done so.

Mr. Dalyell: This is a deeply serious matter. The Minister is talking of doubling and trebling, but what figures are being doubled and trebled? He must be careful about his language.

Mr. Lang: I shall repeat some of the figures that I have already given. The council's budget this year is 16·9 per cent. above assessed need as compared with 6·1 per cent. for other councils. Its budget is £29 million, or 7·4 per cent., above guideline. That also is a dramatic increase. The figures stand out sharply when compared with those for other councils.
It is of course reasonable to ask what excuses or explanations Lothian has to offer. It has had a full opportunity to explain itself, and its case is recorded in the report. Those who read it dispassionately, together with the note of the meeting that it subsequently had with me, will not be surprised that we were not led to change our

view. Those aspects of Lothian's representations which will be of most general interest concern what it says about local needs and the need for expansion in services. But if we compare the detail of its budget for this year with its provisional outturn for last, what do we discover? Planned increases in volume terms of 8·4 per cent. in social work, 14·5 per cent. in roads and road lighting, 25·7 per cent. in concessionary fares payments, 32·4 per cent. in bus subsidies, which in most of the rest of the country are coming down dramatically, 46 per cent. in planning, 9·4 per cent. in consumer protection and 6·1 per cent. in central administration. There is no sign in all this, of services being pared to the bone, or of pressing needs going unmet. Indeed, no services show a planned volume reduction.

Mr. Nigel Griffiths: Before coming here, I worked with the mentally handicapped in Lothian region. Is the Minister aware that people like me are aware of services being cut to the bone by the previous Conservative alliance administration on the council and now by the Government?

Mr. Lang: I have just shown through the figures that I gave that, far from there being cuts, planned increases in real terms are being contemplated.
The impression that I am left with is rather of expenditure programmes running out of control, and of plenty of scope for real priority needs to be met by sensible budgeting and pruning back in areas of lesser priority.

Mr. Alistair Darling: The Minister mentioned increased expenditure on subsidies for bus services in Lothian region. Is he aware that, because of the Transport Act 1985, the council has had to spend £2 million more on subsidising private companies to operate what is effectively a worse bus service than we have ever had? If the Minister does not accept my word, will he accept that of the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton), who wrote to me in his capacity as a constituency Member more than any other hon. Member about the appalling service in his constituency?

Mr. Lang: I shall not accept that from the hon. Gentleman, or that bus services in Lothian are any more of a problem than they are in other parts of the country. Lothian is planning a 32·4 per cent. increase in bus subsidies when they are coming down elsewhere.
The position is clear. Lothian regional council has ignored the very realistic guideline my right hon. and learned Friend gave it last autumn. It is unconcerned about the effects of its policies on the ratepayers. The Labour party has continued where it left off when it lost control of the council in 1984. My right hon. Friend used his powers to control its spending then and we are again doing so now. I seek the House's approval of the report.

Mr. John Home Robertson: The hon. Member for Galloway and Upper Nithsdale (Mr. Lang) — I hesitate to describe him as a Minister, because I do not know how anyone with the kind of mandate that this lot have got could possibly describe himself as a Minister — said that he was disappointed to find himself in conflict with Lothian regional council again.
I suspect that conflict with the regional council was left on the agenda by Michael Ancram and that, unless


someone takes it off the agenda, the Minister will find himself doing all this time and again, simply because Lothian region is there. It is about time that someone in the Scottish Office started dealing with these matters objectively.
This is the third time in the past six years that the House has taken it upon itself to fix the budget of the regional authority that serves my constituency and the rest of the Lothian region. East Lothian is the biggest constituency in the region, in terms of population and area, and I can tell the Minister, having had recent contact with the electorate, that the people of my constituency and those of most other constituencies in Lothian would like the Government to get off the backs of the regional councillors and let them get on with the job that they were elected to do.
Tonight's Circumstances would be absurd if they were not such an affront to the people of Lothian region. The Westminster House of Commons, in all its glory, is taking it upon itself to assume authority over the road repairs, the drains, the home helps, the school dinner service and the lollipop men of Lothian region, The House, which effectively means the Government, is assuming power over Lothian's budgets while leaving responsibility in the hands of local councillors. Power without responsibility seems to be the prerogative of the Conservative party in Scotland nowadays. I sense that some English Conservative Back Benchers may be getting rather restive at the prospect of spending the next three hours or so providing the votes to sustain their men in the Scottish Office. If the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind) keeps pursuing his spite against the people whom he is supposed to be serving, there will be stormy times ahead and it might help English Members to recognise the attractions of constitutional reform in Scotland.
The House is about to determine the budget for Lothian region. I expect that eight of the 10 Lothian Members will vote against the report presented by the Scottish Office. They are likely to be outvoted by Members from far-away places who know little and care less about Lothian region. I wonder whether all those who will vote on Lothian's budget know what they will be doing to my constituents and to those of the right hon. and learned Member for Pentlands. Indeed, I wonder how many of those Members know where Lothian region is and what its responsibilities are. It is an affront to Parliament that it should be used in such a way.
The House has just voted to claw back £51·25 million from Lothian region's rate support grant. Now the hon. Member for Galloway and Upper Nithsdale has invited us to lop £18·5 million off Lothian's budget, on the ground that the Scottish Office thinks that the region's spending plans are excessive and unreasonable—highly subjective terms used by the Government for the purpose of pursuing their punitive policies towards local authorities.
I know that the rates in Lothian have gone up at an alarming rate. Since the Government came to power in 1979 the proportion of local costs covered by rate support grant in Lothian has collapsed from 58·4 to 37·5 per cent. Meanwhile, ratepayers have found that their share of the burden of local costs has been forced up from 41·6 to 62·5 per cent. It is no wonder that rates have been forced up. However, that is not the regional council's fault. It is a consequence of decisions taken by the Government.
Of the net rate increase of 14·1p in the pound this year, only 2·3p is attributable to growth or new policy initiatives

taken by the new Labour administration in Lothian. The remaining 11·8p is attributable to a range of factors determined either by the Government or by the outgoing Tory administration in Lothian. All this fuss is about a growth element in the regional council's budget of 2·3p in the pound. The hon. Member for Galloway and Upper Nithsdale talked about doubling and trebling and about macro-economic considerations—2·3p in the pound.
While we are thinking about that outgoing Tory administration in Lothian, let us reflect for a minute or two on its last budget. As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said in the previous debate, it was 6·6 per cent. above the Scottish Office guideline figures, but it was acclaimed by Government spokesmen only a year ago as being the budget of a prudent and responsible authority. Now, just a year later. a Labour budget that is just 0·8 per cent. higher than the guidelines is pilloried as being excessive and unreasonable. Evidently the Government have some subjective view of the threshold of excess and reason. It is either somewhere between 6·6 per cent. and 7·4 per cent., in which case we should be told so that we can avoid these pitfalls in future. or, much more likely, these things have more to do with the political complexion of the council and old-fashioned political spite by the Government and the Scottish Office.
Let us consider some facts about the finances in Lothian region. First, the spending per head in the region is 0·2 per cent. below the average for the rest of the Scottish regional councils. The Minister tried to dismiss that fact. but it is one that he cannot deny, and he knows it.
Secondly, the needs assessment procedure of the Scottish Office discriminates quite capriciously against Lothian region. Despite the growing numbers of underfive-year-old children in the region and the growing numbers of elderly people, there is no increase in the needs element of rate support grant. Nothing is being done to cater for their growing needs.
Thirdly, the Government guideline figures for the region are artifically low and have increased by only 152 per cent. since 1978 compared with the 161 per cent. average increase for the other Scottish regions.
Fourthly, if this cut is imposed Lothian will be the only one of the five supposedly comparable councils with spending levels below that of 1978–79 in real terms. Another fact that ought to carry some weight in our deliberations is that most of us who represent the Lothian region recognise that public expenditure in the region is too low. The people there want better services. That is what they tell me practically every day of the week.
I was interested to hear my hon. Friend the Member for Edinburgh, Central (Mr. Darling) explain that the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) had recently written to him in his capacity as chairman of the transport committee of Lothian regional council calling for more expenditure and better services on public transport. People are asking for better services. In my experience, the people who are pressing most loudly for more expenditure tend to be people in Conservative areas of Lothian. There is something rather schizophrenic about that.
There have been cuts in service in the region, and that is borne out by the facts. Since 1978, when spending in real terms by all Scottish regional councils has grown by 3 per cent., Lothian region's expenditure grew by only 0·2 per cent. Since 1982, council spending has fallen by over £33 million in real terms. We now find ourselves, after the


previous Tory administration in Lothian, with significant cuts in the home-help service for elderly people, despite the growing need for such services. There are also cuts in education and in things such as road maintenance. There is a crying need for better services in Lothian, especially for our children and elderly people. That is what the present council was elected to provide and it had a very clear mandate only 15 months ago.
The council's budget provides for modest growth to improve services in six specific areas. First, it wants to extend nursery education. Secondly, it wants to expand children's centres. Thirdly, the council wants to improve both primary and secondary education services and facilities. Fourthly, it wants to extend home care and day care for elderly people. Fifthly, it wants to improve concessionary travel for elderly and handicapped people in the region. Sixthly, it wants to extend day centres and residential care facilities for handicapped people.
From my own experience in my constituency, I can confirm that there is an urgent need for improved services in all those areas. That is not a programme of mindless extravagance, as the Government are suggesting. It is a cautious, responsible and constructive programme to provide reasonable local services in accordance with the wishes of the electorate. Yet the Secretary of State is calling for a cut of £18·3 million in services for the area that he is supposed to represent. I wish that he would tell us precisely what he would like to see cut out of the services that are provided by Lothian region in his constituency instead of trying to hide behind the formula that he has arrived at and is trying to force through the House.
I gently remind the Government that in the regional council elections in 1986 the Conservative party, which stood for cuts, was routed. It received only 23 per cent. of the votes in the Lothian region, and it managed to scrape only 27 per cent. at the parliamentary elections last month.
The Government's case is pathetic and threadbare. Tonight's action by the Secretary of State shows that he is content to be no more than a quisling figure in representing the Cabinet in Scotland rather than the interests of Scotland in the Cabinet. The right hon., and learned Gentleman knows that he has no mandate to govern in this manner. He would be better advised to seek to govern by consent instead of going outright to seek confrontation with the people of Scotland. The majority of Members representing constituencies in the Lothian region and from Scotland generally will vote against this oppressive and unjustifiable measure at the end of the debate. Government Back Benchers should reflect on the recent fate of so many of their Scottish colleagues, including the two Conservative Members who represented constituencies in the Lothian region, on the implications of this sort of measure in the future conduct of Scottish business in the House. The report should be rejected out of hand.

Sir Hector Monro: The Labour party has recently suffered the third of three consecutive catastrophic defeats in the United Kingdom, yet it will not learn lessons from the electorate, which wants to see lower expenditure by local authorities throughout the United

Kingdom. If we talk to ratepayers in Scotland, England, Wales or Northern Ireland, we find that they all want to see local authorities being careful with public expenditure.
If we do not have care with public expenditure, the Government's important economic policies will fail. It is vital that public expenditure, which includes local government expenditure as much as that of central Government — it all comes from the taxpayer or ratepayer — is kept down. We must be prudent and exercise good housekeeping, yet Labour Members want local authorities to spend carte blanche wherever they like and for whatever they want to budget. Their view is that local government must spend and that ratepayers including taxpayers must cough up.

Mr. Donald Dewar: Will the hon. Gentleman address himself to the effective argument that was advanced by my hon. Friend the Member for East Lothian (Mr. Home-Robertson)? The expenditure of Lothian region that came from rate support grant has fallen from about 58 per cent. to 37 per cent.— I am sorry, the percentage of total expenditure met by RSG payments has fallen substantially. Does the hon. Gentleman accept that a large contributory element to the increase in rate poundage has been the Government's policy?

Sir Hector Monro: It is public expenditure that matters; and the area of expenditure is not crucial. Public expenditure overall has an effect on inflation, and keeping down inflation has been a key factor in getting the economy right. We have been successful in reducing inflation and keeping it low because we have kept down public expenditure. Do Labour Members want roaring inflation of the sort that we experienced in the late 1970s under the previous Labour Government, with rapidly rising unemployment? I know that unemployment has doubled under this Government, but at long last it is declining, because the Government's economic policies are working successfully. I hope that the hon. Gentleman will acknowledge that unemployment has fallen steadily in Scotland this year. The fall will continue in the months ahead, because we have kept down public expenditure. [Interruption.] Labour Members are nattering away and not listening to any of the debate because they are interested only in boosting their local authorities through COSLA and encouraging them to spend what the hell they like. That is not the way to conduct an economic policy.
We have heard an awful lot about the success of the Labour party in Scotland in the election. In the previous Parliament, there were 40 Scottish Labour Members, and they were no good. Now we have 50, and they seem to be worse. I do not think that we have anything to fear from them. They talk of grinding us into the earth all night, every night, although incidentally only about 25 of them are here [HON. MEMBERS: "Where are Conservative Members?"] They do not need to be here because they know the arguments. Scottish Opposition Members are supposed to be launching devastating attacks on the Government, but I have not heard a speech tonight that will cause any worry at all to the people of Scotland or to the Government Front Bench.

Mr. William McKelvey: What about Nithsdale?

Sir Hector Monro: I shall be delighted to come to Nithsdale. Does the hon. Gentleman know that Nithsdale


received the biggest rate support grant increase in Scotland this year? It received a 44 per cent. increase on housing revenue account and a 114 per cent. increase on non-HRA. No local authority has been better treated than Nithsdale by my right hon. and learned Friend the Secretary of State in the current economic year —[Interruption.] That is what I ask: why are they complaining? The authority has been very well treated by the Government. It budgeted knowing exactly what the repercussions would be. It knew that a heavy penalty would be imposed on it if it budgeted £200,000 over what was reckoned to be admissible. The important point is that the authority will be penalised only if it spends the money. It should think carefully about whether it can reduce its expenditure and avoid those penalties.

Several Hon. Members: rose——

Sir Hector Monro: Of course I shall give way; hon. Members should not he so impatient.

Mr. McKelvey: Am I right in thinking that the council is made up of 28 members—seven Conservatives, seven Labour, seven independent and seven Scottish National party — all of whom are totally opposed to any cuts introduced by the Secretary of State for Scotland? The four sevens which go to make up the 28 councillors are together on that. [HON. MEMBERS: "Well done"] It is the result of a comprehensive education.

Sir Hector Monro: There has often been an alliance between the Scottish National party and the Labour party, and somehow or another they manage to influence one or two independents. [HON. MEMBERS: "What about the Tories?"] They are not in the least bit in favour of increased expenditure; heavens, no. We shall go back to our economic policies of keeping public expenditure down.
Like some Opposition Members and some of my hon. Friends I have some experience as a local authority councillor — 15 years in fact. Every local councillor enters a council full of ideas about how he will spend money to improve education, health and every other service. However, one soon realises that there has to be a prudent balance of expenditure on all services. One cannot have carte blanche to spend any amount that one wishes.

Mr. Dennis Canavan: Will the hon. Gentleman tell the House whether all this was part of his original speech or whether he decided to insert this part of it when the Under-Secretary of State deliberately left the Treasury Bench and joined him on the Back Benches to bully, nobble and hector him into changing his speech and putting party before constituency?

Sir Hector Monro: As ever, the hon. Gentleman is completely wrong. My hon. Friend was discoursing with me on a completely different subject of far greater importance, and the hon. Member for Falkirk, West (Mr. Canavan) would have loved to have heard our conversation. But we shall leave that to another day.
The hon. Member for East Lothian (Mr. Home Robertson) will know that we have seen much miserable weather in East Lothian over the past three days, but a wonderfully conducted golf championship at a golf club that is very well run.
Lothian council has increased expenditure by 29 per cent. We must support the Government in preventing Lothian council from spending so much money. If it continues to do so, there will he a green light to other

councils to do the same. On and on we shall go, with escalating public expenditure, inflation, increasing unemployment and all the failures of economic policy that we saw under the Labour Government.

Mr. Home Robertson: The hon. Gentleman talks about a green light for endless expenditure. He suggests that councillors should know that they will catch it in the neck if they spend above a certain figure. How on earth do councils know that? The present Lothian k ministration is almost exactly as far above the guidelines as the previous Lothian administration. It happened to be Tory and was not penalised. This one is being penalised. What has changed? What is the threshold?

Sir Hector Monro: As I said, there will be a green light if Lothian council and Edinburgh district council continue to spend as they have. Other councils will follow suit immediately. There will then be a substantial increase in public expenditure, inflation and unemployment and we will again have the economic circle which we have managed to prevent during the past eight years. That is why I am determined to support the Government I hope that they maintain the pressure on councils to keep down public expenditure and then everyone can have a little more of the available cake.

Mr. Adam Ingram: I am grateful for the opportunity to speak in this debate, albeit in the form of my maiden speech. I pay a sincere tribute to my predecessor Dr. Maurice Miller, who was the Member for East Kilbride since it was formed as a new constituency in 1974. Before that, he was the Member for Glasgow, Kelvingrove from 1964, having spent the previous 14 years as a distinguished councillor on the Glasgow corporation.
Glasgow and East Kilbride may have changed over the years, but Maurice Miller remains the same. He is a quiet, pleasant man who went effectively about his business as a parliamentary representative. He was a Member of Parliament for 23 years, and he made many friends in this place. He was well respected and well liked and his main aim was to serve the interests of his constituents diligently and thoroughly. That he achieved. He was a good and faithful servant of the Labour party and the House. I therefore count it an honour and privilege to follow him as the Member for East Kilbride.
I mentioned that East Kilbride new town has changed over the years. The neighbouring communities which make up the rest of the constituency—the villages of Strathaven, Glassford, Chapelton, Sandford, Auldhouse and Busby — have all retained their distinctive welcoming features, both contributing to and benefiting from the success of their much larger neighbour, East Kilbride new town. Although those communities may riot have changed over the years, the new town has grown from a small, rural, residential community of 2,500 people to the most successful of Scotland's—perhaps Britain's —new towns. It is now Scotland's sixth largest town and it is still growing.
It is not for nothing that East Kilbride is known as Scotland's No. 1 new town— [Interruption.] It has a proud engineering tradition. It has a significant printing industry and textile industry and is also in the forefront of the emerging new technologies. I conducted some research on the maiden speech of my hon. Friend the Member for


Cumbernauld and Kilsyth (Mr. Hogg), who claimed some years ago that the honour of representing Scotland's No. 1 new town should rest with him, but I rightly lay claim to East Kilbride as being No. 1. The second largest employer in the town, employing 1,800 people, is a major manufacturer of silicon chips and related equipment.
I could go on extolling the virtues of East Kilbride. I have lived there for 17 years, it is a fine place in which to live and it is an honour to represent it. Unfortunately, the town's capacity to thrive and prosper has been put at risk because of the policies of the Government. The privatisation of Rolls-Royce has caused questions to be asked, not least among the work force, about the long-term future of the East Kilbride plant. Similarly, Anderson Strathclyde plc, the first major industrial employer within the town—then known as Mayor and Coulson—has been reduced to a mere fraction of its original size and is now threatened with the possibility of closure because of the lack of proper investment in the British coal industry.
A simple, straightforward commitment to a regenerated industrial manufacturing base by the Government could transform East Kilbride's and Scotland's fortunes overnight. The will is there among the people of East Kilbride to succeed, as is the capacity and energy. They just need the right industrial climate —something that they have been denied.
I recognise that the subject of the debate is local government. We have just disposed of an order that will penalise Scottish local authorities trying to provide services in their communities and we are now considering an order that will further penalise the Lothian region and the Edinburgh District Council. I have had the honour of serving as a district councillor in East Kilbride since 1980 and as leader of the administration since 1984. Therefore, I know the problems that those cuts cause to a community.
Although East Kilbride is an expanding community, it has not been provided with the means by the Scottish Office to keep pace with demand. Genuine difficulties exist in housing. A moratorium was imposed by the Scottish Office on the building of new public sector houses from 1983 until just a few months ago. To get a home of their own, young couples born and bred in the town either have to leave the town or live in overcrowded accommodation for unacceptable periods. Schools are badly run down and in need of modernisation. As a new town, East Kilbride has a young population, yet it does not have a maternity facility of its own. The general hospital at Hairmyres is old and inadequate—a sad reflection of the rundown nature of much of Scotland's health services.
This is the 40th anniversary of East Kilbride as a new town. In a foreword in a book to commemorate the event, the Secretary of State for Scotland said:
It marks a striking achievement: the creation of a substantial town, an internationally recognised industrial centre, and a community proud of its parks and sports centres no less than of its high-tech factories.
All of those achievements have been provided by public investment, and such congratulations ring hollow when one looks at what the Government are doing tonight. A community cannot provide for itself unless it is given the encouragement and resources from central Government to do so.
For the past five years I have served as a full-time union official with responsibility for Edinburgh district council

and the Lothian region. I know that the speeches made by Labour Members are supported by the facts. From 1982 to 1986 Lothian region was under Conservative control. During that time 5,500 council jobs were lost, services were cut and the community suffered. The people of Lothian reacted by voting in a Labour administration committed to providing services and much needed local government help for those in need. Likewise, in Edinburgh city council, the electorate expressed itself in 1984 by voting for a spending administration after many years of Tory control.
There has been much talk tonight about who has got the mandate to govern Scotland. The Secretary of State for Scotland asserted elsewhere that the Conservative Government won the general election and therefore have a mandate to govern Britain.

Mr. Bill Walker: We did.

Mr. Ingram: I ask the hon. Gentleman and the Secretary of State to recognise that the people of Lothian and Edinburgh spoke loud and clear on 11 June. They rejected the philosophy of cuts in local government finance and the Secretary of State's punitive actions against his own city and region. His depleted Scottish support in the House of Commons speaks volumes on that point.
Lothian and Edinburgh councillors also have a clear mandate. The Secretary of State's actions tonight ignore what the people of those areas want. They want more local government services, not fewer; better services, not worse; and caring services, not cuts. Like East Kilbride, Edinburgh and Lothian can prosper, but they can do so only when given the means by central Government. Public service used to be valued by the Conservative party, but the Government and the Scottish Secretary of State now simply view it with contempt. Only by rejecting the punitive and unwanted cuts that have been imposed by the Government can we put public service back on its pedestal again, as a provider of essential services, caring for those in need, and making for a better quality of life for all the community.

Sir Russell Johnston: I congratulate the hon. Member for East Kilbride (Mr. Ingram) on his maiden speech. I am sure that he will be an admirable successor to Maurice Miller, who, as he rightly said, was respected and liked by hon. Members on both sides of the House. His speech was clear, direct and well ordered. I am sure that our debates will benefit greatly from his incisive contributions. That is more than I can say for the hon. Member for Dumfries (Sir H. Munro). Really, what a cheek the hon. Gentleman had! Perhaps it is because at his age that he has a brass neck. The hon. Member knows that Scotland rejected Conservative party policies. Indeed, for a long time, we cannot have seen an aging emperor preening himself upon his apparel when he stands stark naked.
I have three short points to make. First, I do not accept the basic contention that Lothian council has a genuine democratic mandate and is therefore entitled to proceed with its election programme, irrespective of other views, and, at the same time, to complain of Government interference with it. On that point, I dissent from the remarks made by the hon. Member for East Lothian (Mr. Home Robertson). In Lothian, at the last regional election, 41·7 per cent. of people voted for the Labour


administration. For that, Labour obtained 65 per cent. of the seats — 32 out of 49. Only 21 per cent. of the electorate positively voted for Labour. That does not justify Labour's claim to speak exclusively for Lothian. We shall repeat the case for electoral reform.
Secondly, although I deny the claim to be exclusively representative, I accept the three basic points that have been made; first, that in the past decade expenditure has been 2·8 per cent. less than the average for Scottish regional councils, and that fact should be recognised; secondly, that expenditure per head — this point was made by the hon. Member for East Lothian—is lower than the average for all regional councils; and thirdly, it is nonsense—I say this as a member of a party who was involved — for the Secretary of State not so long ago to extol the frugality of the Conservative-alliance administration in Lothian, which was 6 per cent. over guidelines, and now ferociously to penalise spending 7·4 per cent. over.
Thirdly, the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) clearly put the consequences of the report. I am glad of the rare opportunity to agree wholeheartedly with him. The penalty in Lothian will have the inevitable effect of reducing the established services to the young, the elderly — especially in respect of the transport concession — the handicapped, as the hon. Member for Edinburgh, South (Mr. Griffiths) said, and probably the police. If the Government believe that the quality of service is too high and should be reduced, they should say so, because that is the effect of their action and that is why we oppose the report.

Mrs. Margaret Ewing: Although neither I nor my colleagues come from Lothian region——

Mr. Dalyell: On a point of order, Mr. Deputy Speaker. What are the guidelines for this debate? I claim no precedence, but other hon. Members represent the Lothian area. Is this a Lothian debate or is it a general debate?

Mr. Eric Forth (Mid-Worcestershire): Further to that point of order, Mr. Deputy Speaker. I know that the Chair has recently changed, but I have attempted twice to catch the Chair's eye and no one from the Conservative side of the House has been called twice in succession. We are curious to know—here I support the hon. Member for Linlithgow (Mr. Dalyell)—what the basis of the debate is.

Mr. Deputy Speaker (Sir Paul Dean): Order. I suggest to the House that it is far better to leave this to the Chair. We are only using valuable time.

Mrs. Ewing: If hon. Members will give me an opportunity to speak, they will be realise that I shall very brief and that they will have an opportunity to catch your eye, Mr. Deputy Speaker.
The Secretary of State suggested that the Lothian region budget is excessive and unreasonable. The Minister who opened the debate on this report followed that up with some extremely colourful language which, when challenged, he was unable to substantiate.
The Scottish National party will oppose this report on basic principles which apply to the whole of Scotland. The Government have brought forward yet again the dead hand of centralisation and have removed from local government its ability to manoeuvre, to set its policies and to decide what is best for the local community. There has

been much talk from the Conservative Party about accountability in local government. With this succession of orders and reports, which remove money from the local authorities, the Government are denying to local government genuine accountability by local councillors to the communities. There can no accountability if there is no democratic process in local government authorities. Our councillors should have the right to decide priorities within a budget that is acceptable to their communities.
I remind the House that Scotland is a wealthy nation. Tonight we have witnessed the Government taking £202 million from local government in general through yet another cut in the rate support grant, and Lothian region will have £33 million taken away from it as a punishment by the Government. What are the implications for services in Lothian region of this report, coming on top of the cut in the rate support grant? In the briefing given to all Scottish Members, the regional council suggests how the following services will be affected: home care provision for the elderly will be reduced; hypothermia prevention will be withdrawn; concessionary travel will be reduced; and day care provision will be reduced. For services to people with a handicap, special education classes will be cancelled; living aids and adaptations will be reduced; and day ca re for the mentally handicapped will be cancelled.
Those are some of the stark possibilities facing Lothian region as a result of the Government's policy. If the Minister disagrees with that assessment, will he tell the House where the cuts will be made?
The Government are adopting a policy which reminds the people of Scotland that they are living in a colony. Conservative Members have made much play of the fact that Scotland complains about being treated like a colony. This Government are doing that. Scotland is the only nation in the world to have discovered oil and to have ended up poorer as a result. We see poverty and deprivation in our country but we are not allowed access to those resources.
Finally, on the mandate issue, it was said earlier— [Interruption.]—I assure hon. Members that this is the final final — it was said earlier that the people of Scotland rejected the Conservative Government and that 76 per cent. voted for parties that were not the Conservative party in Scotland. That occurred not least in Lothian region and in the city of Edinburgh
The hon. Member for Glasgow, Garscadden (Mr. Dewar) said that it would appear that the Secretary of State for Scotland has not learnt any lesson from the election because we have not seen any concessions from the Conservative Government. However, the hon. Member for Garscadden should ask himself whether he has learnt from the election result and say what the Labour party will do to deliver us from the type of policies that are being enacted by the Conservative Government.

Mr. Tam Dalyell: We should get back to the facts. I ask whether the Government agree or disagree with the following facts from the brief that Lothian region has given us. On the reduction in services and expenditure between 1981 and 1986, do the Government agree that the planned expenditure of the council declined by £87·2 million at November 1985 prices? Allowing for falling school rolls and other factors, that represents, a reduction in real terms in council spending of £66 million. Do the Government agree?


The effect of such a significant reduction in expenditure has been to lower the standard of service that is available to many client groups that are served by the council, as the following examples show. There are officials in the Box. I do not know what they are doing there unless they have answers to these questions. Therefore, I put the figures to the Minister. On social work and home helps, between 1982–83 and 1986–87 the quality of home care for the elderly has declined as the number of home helps has reduced by 14 per cent., despite a 9 per cent. increase in the frail elderly. Do the Government agree? As a consequence of increasing demand, the number of home helps able to be provided fell, on average, from 6·7 to 5·4 per client per week over four years. Do the Government agree?
On teaching standards, from a position of 1·1 per cent. above the Scottish regional average in 1982–83, educational expenditure per head of population fell to a level of 12·8 per cent. below in 1986–87. Is that an acceptable figure or is it not? Over that period, expenditure constraints moved Lothian significantly closer to Government staffing guidelines in primary and secondary education. In nursery education, Lothian's increasing number of under-fives, which increased 1·8 per cent. over four years, has placed further strains on a service which has reduced staffing levels by 1·9 per cent. since 1982–83.
Finally, on road maintenance, a four-year reduction of 15·5 per cent. in the highways department staffing budget is largely the result of reduced maintenance expenditure and direct Labour organisations' legislative requirements. Expenditure restrictions have led to a marked deterioration in the quality of the road network. From a former position of 15 per cent. above the Scottish average, Lothian's percentage per head of population dropped to 10 per cent., below in 1986–87.
I close with the thought that, if the Government are to take such action against a particular region, they had better get their figures accurate. Quite frankly, what we heard from the Minister was a lot of sloppy, ill-briefed nonsense. He talked about doubling and trebling but had to be forced for figures. Some of us are interested tonight in the hard statistics. I expect answers to my questions, because it is an absolute disgrace, when senior officials from the Scottish Office are in the Box at this time of night and the Minister is unable to answer those questions.

Mr. Eric Forth (Mid-Worcestershire): I agree substantially with much of what Opposition Members have said this evening because I find it difficult to understand how any Government, subjectively or even by using figures, can seek to impose on any local authority what it should spend. The Government's document provides a clue on page 2 under the heading
Assessments of Relative Expenditure Needs.
It states:
The assessments of relative expenditure needs of local authorities are prepared using the client group approach. This is a systematic means of allocating a pre-determined level of expenditure provision among local authorities which has been formulated in consultation with the Convention of Scottish Local Authorities. The client group approach does not determine the level of provision in absolute terms nor its distribution between services.
I do not understand much of that and, from what Opposition Members have been saying, they do not

understand much of it either. No wonder. As soon as any Government set out to assess or attempt to assess the needs of any local authority compared with others, they inevitably get into difficulties.
It has been pointed out several times during this debate that comparisons have been made between Lothian expenditure and that of other Scottish local authorities, and arguments have been made one way and another about whether such comparisons are favourable. It is significant that no comparison has been made between Lothian's expenditure and that of any English local authority. I begin to suspect, as I think many of my Conservative colleagues do, that that is because, as ever in a case like this, there is a cosy Scottish conspiracy to ensure that comparisons are made only between those high spenders north of the border and not between them and any local authority south of the border. [Interruption.] My ratepayers and taxpayers in Hereford and Worcester would be horrified if they knew what was being spent in Lothian region. My ratepayers and taxpayers, who elected a Conservative-controlled county council on the slogan "value for money", would be aghast if they knew the rampant expenditure of Lothian region and all the other regions of Scotland. [Interruption.]
If my right hon. and hon. Friends are to be in the comparison business, I invite them to draw the real comparison, which is between the levels of expenditure that the people north of the border have come to expect as of right and the levels of expenditure that decent people in England have come to expect.

Mr. David Blunkett: Will the hon. Gentleman tell me what he thinks the electorate of Lothian think of services such as education, particularly the deplorable standards, the lack of books, the reduced number of teachers and the lack of provision for the mentally handicapped and the disabled, in Hereford and Worcester county?

Mr. Forth: I am coming to that— [Interruption.] —and I invite the hon. Gentleman to intervene again if I do not answer his point.
My next point refers——

Mr. Canavan: Answer the question.

Mr. Forth: Be patient. [Interruption.] I invite the noisy Member opposite to be patient. I shall deal with his hon. Friend's point when I am ready.
We have heard many comments from Opposition Members about the paucity of the rate support grant in the Lothian region and others. I wish we had no rate support grant, certainly not for Lothian region, or for any of the other Scottish regions, or for any of the English counties. The rate support grant is one of the most invidious measures that we have had to put up with for many decades. It involves arbitrary decisions from the centre —I am sure that Opposition Members will agree with this—mainly from London although to a certain extent from Edinburgh, about the redistribution of assets and resources from one area to another on no apparent bases other than those devised by the bureaucracy to try to make some sort of assessment of need. That can vary from time to time and from administration to administration.
The reason for all this mess and why successive Governments have had to put up with arbitrary judgments of levels of expenditure and rate support grant is because


of the kernel of the matter before us tonight, as so often before: there is absolutely no way in which elected councillors can go to their electorate and find a proper judgment by that electorate of the level of expenditure it is making.
In answer to the question raised by the hon. Member for Sheffield, Brightside (Mr. Blunkett), I shall stand four square behind the principle that the electors in Hereford and Worcester county should always be able to judge the expenditure and the services given by the county council against the amount of rates and local taxation levied on those electors.
I invite my hon. Friends and the Opposition to contemplate moving forward together towards a system whereby the electorate in each area may make a proper judgment as to the level of expenditure of the elected councillors and the level of local taxation necessary to provide the services. I am sure that few people would disagree with that—I am sure that the hon. Member for Brightside would not disagree with that.
All of tonight's debate will be rendered quite superfluous once we get the community charge—[HON. MEMBERS: "Oh!"] On yes — because that charge will sweep away at one stroke all the arbitrary, artificial and unnecessary arguments about judgments on whether levels of expenditure are necessary, what levels of services are necessary and about the relationship between what elected members in each area want to give their electorate and what that electorate arc prepared to pay towards the provision of those services.
When we get the community charge in Lothian, Scotland and, as quickly as possible, in England, we will finally do away with debates such as this. We will be able to return control where the Opposition want it to be—in the regions and districts. In that way, elected councillors can go to the electorate with the proposed level of expenditure and levy upon everyone who will vote the appropriate level of taxation. When we reach that state, these artificial debates will become completely unnecessary and we will all be as one.

Mr. Gavin Strang: I should like to point out to Conservative Members that the purpose——

Mr. Nicholas Fairbairn: On a point of order, Mr. Deputy Speaker. I did not interrupt at the time, but a number of Labour Members used the word "quisling" during the course of the speech of my hon. Friend the Member for Mid-Worcestershire (Mr. Forth) I do not think that that is parliamentary language——

Mr. Home Robertson: It is highly appropriate.

Mr. Fairbairn: The hon. Member for East Lothian (Mr. Home Robertson) says it is "highly appropriate" and that makes its use even more infamous. May I suggest that those who used that word be asked to withdraw it, including the hon. Member for East Lothian sitting on the Opposition Front Bench?

Mr. George Galloway: I said it and I refuse to withdraw it.

Mr. Deputy Speaker: Order. I did not hear the word. If it was used by any hon. Member, it should be withdrawn.

Mr. Allan Stewart: Further to that point of order, Mr. Deputy Speaker. The House appreciates that

you did not hear the first use of the term "quisling" during the excellent speech of my hon. Friend the Member for Mid-Worcestershire (Mr. Forth). However, a few seconds ago the hon. Member for Glasgow, Hillhead (Mr. Galloway) said, "I said it and I refuse to withdraw it". We seek your guidance on this.

Mr. Deputy Speaker: The Chair does not always hear everything that goes on, particularly below the Gangway. If an hon. Member did use that phrase, which I did not hear, I ask him, whoever he is, to withdraw it. [HON. MEMBERS: "Withdraw."] Order, I have made an appeal. I did not hear the phrase and I cannot identify the hon. Member concerned, so we had better get an with the debate.

Several Hon. Members: rose——

Mr. Fairbairn: Further to that point of order Mr. Deputy Speaker. I must insist on my point of order because the hon. Member for Hillhead not only said, "Quisling", but he said that he said it and that he refused to withdraw it while you were on your feet, Mr. Deputy Speaker. I believe this to be an offence to the House and something that must be corrected.

Mr. Deputy Speaker: Order.

Mr. Galloway: On a point of order, Mr. Deputy Speaker. I was the hon. Member who used the word "Quisling". If your ruling is that that word in unparliamentary I replace it by saying that the hon. Member is a disgrace to the Scottish nation.

Mr. Deputy Speaker: I am obliged to the hon. Gentleman. He is a new Member of the House and of course, the words that he substitutes are acceptable. I must ask him to withdraw the word "quisling".

Mr. Galloway: I withdraw the word.

Mr. Deputy Speaker: I am grateful to the hon. Gentleman.

Mr. Gavin Strang: The debate is not about the taxation of our constituents but about a forced reduction in grants. We are talking about expenditure funded by the Lothian people. A number of hon. Members have said that Lothian region's expenditure excess over guidelines is only marginally greater than that which prevailed under previous administrations. That observation alone is an indication that the Government have been influenced, not by public expenditure, but by political and electoral considerations.
I agree with complaints about the inadequacy and unacceptability of the methods of assessing expenditure in Lothian. This is the third debate of this kind. On the statistics, the Government's criteria are so subjective and inconsistent that one is appalled. One has to look only at the relationship between the expenditure needs figure and the guideline figure over the last nine years to see how arbitrary the whole thing is.
It is clear that Lothian and Edinburgh have been penalised by the Government's approach. We receive no additional expenditure allowance from the Government because of that approach.
That assessment does not do justice to our needs in Lothian. We are consistently and unfairly penalised by the


Government because of their assessment of our expenditure needs and because of the guidelines set by the Government. That is the fundamental point of the debate.
Will the Minister admit that expenditure per head in Lothian is lower than the regional average in Scotland? That is a clear, objective statistic. We are accused of excessive and unreasonable expenditure. The onus is on the Government to make their case. The expenditure per head of our regional authority is lower than the Scottish average. That shows how ridiculous the debate is and how artificial the criteria are.
As a consequence of this report, services in my constituency will be cut severely. We shall see an attack on the provision of education and provision by our social work department, which is bound to hit some of the people in greatest need. Almost certainly, there will be some reductions in provision for concessionary travel and a range of other areas, such as law and order, which has been mentioned.
In Lothian and Edinburgh, under Conservative rule, that expenditure and provision has been reduced to a level that is unacceptable not only to those who vote Labour but to the overwhelming majority of the community—even more than the high proportion of people who vote Labour. We have see that demonstrated repeatedly at the ballot box. That is what is so outrageous about the debate. We are discussing cuts that will destroy hundreds of jobs and lead to a real reduction in the provision of services in our area.
There is no justification for that. When the Labour council was elected and took control in Edinburgh for the first time, and adopted what most people will accept was a high profile approach in its policy of improving services and creating jobs, the vast majority of Conservatives in Edinburgh were convinced that it was a tremendously unpopular policy, and that it was doing the Conservative party in Edinburgh a world of good. When the first major opinion poll was carried out by the local evening paper, they were amazed to find that that policy was popular and that people wanted a higher provision. In the elections, the Labour party had said that the price of improving those services would involve increasing rates, among other things.
To a large extent, the regional elections were fought against a backdrop of the argument of a Labour administration that wanted to improve services and a Conservative Administration that had been cutting back. We had outstanding results for the Labour party. It decisively took control of Lothian regional council. Only last month, we had the parliamentary elections, in which again these issues were a factor—I do not say that they were the only factor—in the political debate. Again we had outstanding results for the Labour party, so much so that we replaced two of the sitting Conservative Members of Parliament with Labour Members and almost replaced the Secretary of State for Scotland with a Labour Member.
Therefore, there is no basis for the report in view of what is wanted by the people of Lothian. We are paying for it through the increase in our rates. That is why the report is such an affront to people in Lothian. It is an outrage that a Government who took such a hammering at the polls in Scotland can bring forward this draconian measure, impose cuts and lay down to the absolute detail

the expenditure that our councillors will be allowed to implement in Lothian. I hope that this is the last time that we shall go down that road.

Mr. Alistair Darling: I congratulate the Secretary of State on still being with us, although he is not leading for the Government in the debate. I noticed that he left for a short while, no doubt to order the taxis that will be required to take him and his Conservative colleagues back home tonight.
We are dealing with a straightforward issue — the amount of money that we spend on services in Scotland, Lothian and Edinburgh. We are not dealing with technicalities or with the Government's figures on guidelines. They are a bogus argument designed to dress up a desire to cut public expenditure in Scotland and to inflict cuts in services. It is a bogus argument that the Government are conducting.
On the one hand, the Minister of State comes forward in the debate with a nice discussion about guidelines and figures, about alleged resources and alleged need. But the fact is that Scottish local authorities stand accused of something that the Government call overspending, as well, I suspect, as being Labour for the most part. Edinburgh and Lothian are accused in the same way of being unreasonable and excessive. It is much to the chagrin of Conservatives in Scotland that they are both Labour-controlled authorities.
The argument tonight should be about the amount of money that we are spending — or not spending, as the case may be — on schools, housing, roads and old people. In Lothian and Edinburgh the need is growing, and the local authorities cannot keep up with that need, merely because we do not have enough money from central Government. If the Secretary of State is committed to reducing rate levels—I accept that there is a case for saying that they are far too high in Scotland and other places—the answer lies in his own hands. If he started to restore some of the £1·5 billion that the Government have cut from rate support grant given to local authorities, we could reduce the level of rates and at the same time ensure that the level of services that we need — for schools, houses, and so on—was properly met.
The Minister has said that it is part of the Government's economic policy to reduce public expenditure. If that is so, it surely behoves the Minister to tell us which services he wants to cut. That is something that the Government have never done. I therefore urge the Minister to say, at the conclusion of the debate, which services he wants cut in Lothian and Edinburgh. We should be interested to argue with him on that basis.
The problem that the Secretary of State and the Government face is that not only do they want to cut public expenditure in Edinburgh and Lothian, but they want to reduce the amount of money the councils spend, in a desperate attempt to make the poll tax more acceptable. They know that independent figure of the officials of Lothian region and Edinburgh district council calculate the poll tax payable by every adult in the area to be more than £400 a head. Before the election, the Government said that the figure would be £200 a head. Last week, the figure had crept up to £289 a head. The Secretary of State must realise that the poll tax, born out of panic following an unnecessary revaluation in Scotland, forced the Government to bring out an ill-conceived and


ill-considered measure, which they are now trying desperately to sell and which I suspect Conservative hon. Members know almost cost them the election in Scotland. It was certainly the cause of a number of their colleagues not returning to this House with them.
If the cuts go through, services will suffer, because every one of the Secretary of State's statistics means hardship for members of the community living in Lothian and Edinburgh. The hon. Member for Dumfries (Sir H. Monro) — I note that he is no longer with us—asked whether we had anything to learn about what the people had to say. I suggest to him that, in 1984, despite the high-profile Government policy on reducing expenditure, for the first time in centuries Labour took control of Edinburgh. In 1986, when the same pattern of early clawback and rate reduction was tabled before the regional elections, Labour was returned with a record majority. Again, in 1987, the message was clear: neither Scotland, nor Lothian, nor Edinburgh is in favour of Conservative policies. The Government should face up to that.
This is not an argument about statistics or about councils being guilty of overspending; it is all about a desire to reduce expenditure. The Government must surely have the decency to accept that their policies find no favour in Scotland, Edinburgh and Lothian. Tonight's debate is about a Government who are determined to pursue policies that they know to be unpopular. The worst of it is that the Secretary of State cannot deliver in his own country and has to bring in the votes of hon. Members from outside Scotland, who know little about the problems that we are facing. Even the Government admit that the so-called economic recovery that they say is taking place has not come far north.
We are facing severe problems. Public expenditure cuts that were forced through by the Conservative and alliance administration in Lothian regional council cost 5,000 jobs. Cuts in public expenditure bring large-scale unemployment. They mean hardship for business, and across the board, because public expenditure is invested in the Scottish economy. The Government's policy is ill thought out and their figures do not add up. As has been asked many times before, how can 7·4 per cent. over Government guidelines be excessive and unreasonable in 1987 when 6.6 per cent. above guidelines in 1986 was said to be the mark of a moderate and reasonable council? Spot the difference—0·8 per cent. The other difference is that Lothian region is now Labour controlled. That is what it is all about. Unfortunately, the Government seem to be attacking Edinburgh and Lothian for electoral advantage. Fortunately, the majority of the electorate saw through them. That is why the Conservatives' stock in Scotland is so low and will continue to slump.
The time has come for us to be honest and start discussing whether it is worth investing in schools, hospitals and social services, because if the Government want to cut such services, they must convince those who they say they represent that they are right.
I want to be fair to the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton). He did not spend all of his time writing to me because bus services in his constituency were reduced after deregulation; he also wrote to a colleague asking whether they could have a nursery school in one of the schools in his constituency. All of us support him in that, but we will never get nursery schools or decent schools and housing until we get the Government support that we need. The contribution made

by local ratepayers would be affordable, and we could then start to rebuild the country, which is what we desperately need.

Mr. Lang: With permission, Mr. Deputy Speaker, I should like to reply to the debate.
We have had an interesting, if fairly predictable. debate and I shall try in the limited time available to respond to some of the points that have been made.
I should like to pay tribute to the hon. Member for East Kilbride (Mr. Ingram) on his maiden speech, which he delivered with great fluency and self-confidence. He clearly conveyed the sincerity of his views. He follows a man, Maurice Miller, who was much respectedd on both sides of the House and who will he missed.
The hon. Gentleman has the great good fortune to represent one of the exciting economic growth points of the Scottish economy where something like one new company decided to locate each week last year. It is indeed a flagship for free enterprise. I am glad that the hon. Gentleman welcomed the lifting of the moratorium on general needs housebuilding, which we were able to achieve quite recently, and we look forward to hearing more from him.
I should like to remind the House of the details of Lothian's budget. Against expenditure of £365 million last year, and a guideline this year of £395 million I, the region has budgeted to spend £424 million. That is 7·4 per cent.. or £29 million, over the guideline and 16–9 per cent., or £61 million, over its assessed need. It has planned volume growth of 6·2 per cent. Among all the figures that have been bandied about tonight, these are the figures that count, and they tell a clear story — a story of extravagance.
Even after the selective action, which is designed only to bring Lothian down to the average excess of guidelines, it will still be able to spend 2·8 per cent., or £11 million, over guideline and 11·9 per cent., or £43 million, over its assessed need.

Mr. Ron Brown: Will the Minister give way?

Mr. Lang: No. The hon. Gentleman will have an opportunity to speak in the next debate.
Lothian will still be able to achieve a volume growth on last year of 1·6 per cent. Much has been sad about the effect of these cuts in services, but the very word "cuts" is misleading, as I am sure it is intended to be. There are no cuts by comparison with Lothian's expenditure last year. Even if the House approves the report, there will still be real growth in Lothian's expenditure.
We have heard many scare stories about how the savings will be found. Lothian will not be forgiven if it chooses to make its ratepayers suffer by making savings in the most conspicuous or heart-rending way. It knows that savings can be made. It is its duty to make them in the best possible way, having proper regard to real areas of priority, which I know exist in Lothian.
The hon. Member for East Lothian (Mr. Home Roberson) accused us of exercising power without responsibility, but it is precisely responsibility that we wish to inject into Lothian's attitude to its ratepayers. The hon. Gentleman listed six areas in which it is trying to make improvements. I could list 19 where it is planning real increases in expenditure.

Mr. Home Robertson: Will the Minister give way?

Mr. Lang: I am afraid not. I must reply to the debate.
The hon. Members for Edinburgh, Central (Mr. Darling) and for East Lothian said that Lothian was not subjected to a report last year and asked why it has been this year. The answer is that there is no precise basis on which excessive and unreasonable expenditure is automatically triggered. It is a matter for assessment each year in the light of a large number of factors. Lothian's budget is 16·9 per cent. above its assessed needs and the next highest region is only 8·4 per cent. above; Lothian is 7·4 per cent. above its guideline and the national average is 2·8 per cent. above; Lothian is requesting a rate increase of 29·8 per cent. from its ratepayers; the figures speak for themselves.
The hon. Member for East Lothian complained that there was no increase in the needs element and that there were demographic changes that justified an increase. I should point out that the number of children under 16 in Lothian—

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14 (Exempted Business):—

The House divided: Ayes 181, Noes 100.

Division No. 21]
[1.15 am


AYES


Aitken, Jonathan
Davis, David (Boothferry)


Alison, Rt Hon Michael
Day, Stephen


Allason, Rupert
Devlin, Tim


Amess, David
Dickens, Geoffrey


Amos, Alan
Dicks, Terry


Arbuthnot, James
Dorrell, Stephen


Arnold, Jacques (Gravesham)
Douglas-Hamilton, Lord James


Arnold, Tom (Hazel Grove)
Dover, Den


Ashby, David
Dunn, Bob


Aspinwall, Jack
Durant, Tony


Atkins, Robert
Evans, David (Welwyn Hatf'd)


Atkinson, David
Evennett, David


Baker, Nicholas (Dorset N)
Fairbairn, Nicholas


Baldry, Tony
Fallon, Michael


Batiste, Spencer
Favell, Tony


Bennett, Nicholas (Pembroke)
Fenner, Dame Peggy


Benyon.W
Field, Barry (Isle of Wight)


Bevan, David Gilroy
Forsyth, Michael (Stirling)


Biggs-Davison, Sir John
Forth, Eric


Bonsor, Sir Nicholas
Freeman, Roger


Boscawen, Hon Robert
French, Douglas


Boswell, Tim
Gale, Roger


Bottomley, Peter
Garel-Jones, Tristan


Bowden, Gerald (Dulwich)
Gill, Christopher


Bowis, John
Goodhart, Sir Philip


Braine, Rt Hon Sir Bernard
Goodson-Wickes, Dr Charles


Brazier, Julian
Gow, Ian


Bright, Graham
Gower, Sir Raymond


Brooke, Hon Peter
Greenway, John (Rydale)


Bruce, Ian (Dorset South)
Gregory, Conal


Buchanan-Smith, Rt Hon Alick
Griffiths, Peter (Portsmouth N)


Burns, Simon
Gummer, Rt Hon John Selwyn


Burt, Alistair
Hamilton, Hon A. (Epsom)


Butterfill, John
Hamilton, Neil (Tatton)


Carlisle, John, (Luton N)
Hampson, Dr Keith


Carlisle, Kenneth (Lincoln)
Hannam, John


Carrington, Matthew
Hargreaves, A. (B'ham H'Il Gr')


Carttiss, Michael
Hargreaves, Ken (Hyndburn)


Cash, William
Harris, David


Chope, Christopher
Hayes, Jerry


Clark, Dr Michael (Rochford)
Hayhoe, Rt Hon Sir Barney


Clarke, Rt Hon K. (Rushcliffe)
Hayward, Robert


Conway, Derek
Heathcoat-Amory, David


Coombs, Simon (Swindon)
Hicks, Mrs Maureen (Wolv' NE)


Cran, James
Hind, Kenneth


Currie, Mrs Edwina
Holt, Richard


Davies, Q. (Stamf'd &amp; Spald'g)
Hordern, Sir Peter





Howarth, Alan (Strat'd-on-A)
Sackville, Hon Tom


Howarth, G. (Cannock &amp; B'wd)
Scott, Nicholas


Howell, Ralph (North Norfolk)
Shaw, David (Dover)


Hughes, Robert G. (Harrow W)
Shaw, Sir Michael (Scarb')


Hunt, David (Wirral W)
Shephard, Mrs G. (Norfolk SW)


Hunt, John (Ravensbourne)
Shepherd, Colin (Hereford)


Irvine, Michael
Shepherd, Richard (Aldridge)


Jack, Michael
Sims, Roger


Janman, Timothy
Smith, Tim (Beaconsfield)


Jessel, Toby
Speed, Keith


Jones, Gwilym (Cardiff N)
Speller, Tony


Jones, Robert B (Herts W)
Stanbrook, Ivor


Kellett-Bowman, Mrs Elaine
Stern, Michael


Knight, Greg (Derby North)
Stevens, Lewis


Lang, Ian
Stewart, Allan (Eastwood)


Lightbown, David
Stradling Thomas, Sir John


Lilley, Peter
Summerson, Hugo


Lloyd, Peter (Fareham)
Taylor, Ian (Esher)


Lord, Michael
Temple-Morris, Peter


Mans, Keith
Thompson, D. (Calder Valley)


Martin, David (Portsmouth S)
Thompson, Patrick (Norwich N)


Monro, Sir Hector
Thorne, Neil


Morrison, Hon C. (Devizes)
Thurnham, Peter


Neale, Gerrard
Tracey, Richard


Neubert, Michael
Twinn, Dr Ian


Nicholls, Patrick
Viggers, Peter


Nicholson, David (Taunton)
Waddington, Rt Hon David


Nicholson, Miss E. (Devon W)
Walden, George


Page, Richard
Walker, Bill (T'side North)


Paice, James
Waller, Gary


Patnick, Irvine
Warren, Kenneth


Patten, John (Oxford W)
Watts, John


Pawsey, James
Wells, Bowen


Peacock, Mrs Elizabeth
Wheeler, John


Porter, David (Waveney)
Whitney, Ray


Powell, William (Corby)
Widdecombe, Miss Ann


Raffan, Keith
Wilkinson, John


Raison, Rt Hon Timothy
Wilshire, David


Redwood, John
Winterton, Nicholas


Rhys Williams, Sir Brandon
Wood, Timothy


Riddick, Graham
Yeo, Tim


Rifkind, Rt Hon Malcolm



Roberts, Wyn (Conwy)
Tellers for the Ayes:


Rost, Peter
Mr. Mark Lennox-Boyd and Mr. David Maclean.


Rowe, Andrew
 


Ryder, Richard





NOES


Abbott, Ms Diane
Foulkes, George


Alton, David
Fyfe, Mrs Maria


Armstrong, Ms Hilary
Galbraith, Samuel


Barnes, Harry (Derbyshire NE)
Galloway, George


Battle, John
Godman, Dr Norman A.


Beckett, Margaret
Golding, Mrs Llin


Beith, A. J.
Graham, Thomas


Blunkett, David
Grant, Bernie (Tottenham)


Boateng, Paul
Griffiths, Nigel (Edinburgh S)


Boyes, Roland
Grocott, Bruce


Bradley, Keith
Haynes, Frank


Bray, Dr Jeremy
Henderson, Douglas


Brown, Gordon (D'mline E)
Hinchliffe, David


Brown, Nicholas (Newcastle E)
Hogg, N. (C'nauld &amp; Kilsyth)


Brown, Ron (Edinburgh Leith)
Home Robertson, John


Campbell-Savours, D. N.
Hood, James


Canavan, Dennis
Hughes, John (Coventry NE)


Clarke, Tom (Monklands W)
Hughes, Robert (Aberdeen N)


Cook, Robin (Livingston)
Ingram, Adam


Dalyell, Tam
Johnston, Sir Russell


Darling, Alastair
Kennedy, Charles


Davis, Terry (B'ham Hodge H'I)
Kirkwood, Archy


Dewar, Donald
Lambie, David


Dixon, Don
Leadbitter, Ted


Doran, Frank
Lewis, Terry


Douglas, Dick
Livingstone, Ken


Dunnachie, James
McAllion, John


Eadie, Alexander
McAvoy, Tom


Ewing, Mrs Margaret (Moray)
McCartney, Ian


Fatchett, Derek
Macdonald, Calum


Faulds, Andrew
McFall, John


Foster, Derek
McKelvey, William






McLeish, Henry
Reid, John


McTaggart, Bob
Roberts, Allan (Bootle)


McWilliam, John
Robertson, George


Mahon, Mrs Alice
Ross, Ernie (Dundee W)


Marshall, David (Shettleston)
Salmond, Alex


Martin, Michael (Springburn)
Skinner, Dennis


Maxton, John
Smith, Andrew (Oxford E)


Meale, Alan
Strang, Gavin


Michael, Alun
Vaz, Keith


Michie, Mrs Ray (Arg'I &amp; Bute)
Wall, Pat


Millars, Rt Hon Bruce
Wareing, Robert N.


Moonie, Dr Lewis
Welsh, Michael (Doncaster N)


Mowlam, Mrs Marjorie
Wilson, Brian


Nellist, Dave
Wise, Mrs Audrey


O'Neill, Martin
Worthington, Anthony


Patchett, Terry
Wray, James


Pike, Peter



Powell, Ray (Ogmore)
Tellers for the Noes:


Prescott, John
Mr. Allen McKay and Mr. Allen Adams.


Primarolo, Ms Dawn

Question accordingly agreed to.

Resolved,
That the Rate Reduction (Lothian Region) 1987–88 Report, a copy of which was laid before this House on 10th July, be approved.

Rate Reduction (Edinburgh District)

The Minister of State, Scottish Office (Mr. Ian Lang): I beg to move,
That the Rate Reduction (City of Edinburgh District) 1987–88 Report, a copy of which was laid before this House on 10th July, be approved.
The House will not expect me to go over all the general background to the powers under which my right hon. and learned Friend has laid this report before the House, nor the economic Circumstances against which Edinburgh district council's spending policy needs to be judged. It may be helpful, however, if I briefly set out the main points again.
The Secretary of State has power to propose a reduction in an authority's rate if he is satisfied that the authority's total estimated expenses are "excessive and unreasonable". The power has been used several times in the past and in particular against Edinburgh district council in each of the last two years. Local authority current expenditure forms an important part of any Government's economic policies as was discussed in the previous debate, and it is therefore necessary to control that expenditure. There are two reasons for this—first, the effect of the spending on the total of public expenditure in the country as a whole and, secondly, the effect upon the local economy of the high rates that go with high spending. Opposition Members have made much recently of the allegedly high levels of community charge in certain areas once the new system of local government finance is in operation. If they showed even half that concern for the level of rate increases imposed by authorities such as Edinburgh perhaps reports such as the one that we are now debating would never need to he put to the House in the first place.
Turning to the details of the report on Edinburgh, the figures tell their own story every bit as eloquently as they did in the case of Lothian, which we halve just been discussing. The council's budget for 1987–88 is £52·26 million, against a provisional outturn for last year of £41·77 million — a planned increase in expenditure of over 25 per cent. Its budget is £10·354 million, or 24·7 per
cent. over guideline, and £11·83 million or 29·3 per cent. over assessed need. The volume growth in planned expenditure over 1986–87 is 15·5 per cent. The rate increase is 29·3 per cent. The excess over guideline of 24·7 per cent. compares with an average for districts other than Edinburgh and Clackmannan of 3·3 per cent The House will recall that my right hon. and learned Friend also initiated action against Clackmannan, as I explained in the previous debate.
Comparison with other authorities of increases in planned expenditure per head shows a similar picture: since 1978–79, the average increase for all district authorities is 11·6 per cent., but for Edinburgh 47·7 per cent. Between last year and this, the comparable figures are 3·5 per cent. for all district authorities and 14·5 per cent. for Edinburgh. Edinburgh's rate of growth in planned expenditure from 1986–87 to 1987–88, at 14·5 per cent. is three times the average for all district councils and more than four times the average for all Scottish local authorities. Once again, the figures speak for themselves. Edinburgh was given a full opportunity to make representations. Its written representations, and the record


of a meeting that I held with them are included in the report. My right hon. and learned Friend the Secretary of State and I have considered the representations carefully but have not been persuaded by them to change our view. The comparator authorities which were used in assessing Edinburgh's budget included all the other Scottish cities and were chosen on the basis of relevant factors. This was an objective statistical exercise. The method of assessing relative expenditure need is developed and operated in full consultation with COSLA, and takes due account of the special factors to which the district refers in its representations, such as the city's role as a tourist centre. One point to emerge from Edinburgh's representations is that the expenditure reductions implied by my right hon. and learned Friend's proposed rate cut will bite particularly hard because there are no financial reserves to cushion the blow, as in previous years. I find this reminiscent of the condemned prisoner asking for other offences to be taken into account. The clear conclusion is that Edinburgh has been living beyond its means for years, hoping, like Mr. Micawber, that something would turn up.
Edinburgh district has to bear in mind that the creation of wealth, jobs and opportunities in its area is being frustrated by expenditure policies that cause personal difficulties for large numbers of people and threaten or destroy business and commercial enterprises. This problem becomes especially worrying when both authorities in an area are pursuing the same high-spending policies. We have already discussed and approved a report which will bring relief to ratepayers in Lothian generally. I now urge the House to finish the job and bring further help to the especially hard-pressed ratepayers of Edinburgh. I seek the House's approval for the report.

Mr. John Maxton: I pay tribute to my hon. Friends the Members for Edinburgh, South (Mr. Griffiths), for Fife, Central (Mr. McLeish) and for East Kilbride (Mr. Ingram) for their excellent maiden speeches. All of them showed a great knowledge of their subject and delivered their speeches fluently. It was a good thing that those three speeches, at least, displayed a knowledge of local government, and a recent knowledge at that.
The Conservative Benches boast no such recent knowledge of local government — in fact, they boast practically no knowledge of local government. [Interruption.] The hon. Member for Tayside, North (Mr. Walker) has never served in local government. It is one of the few things that he does not claim to have done; there are not many. I assume that the hon. Member for Eastwood (Mr. Stewart) is the statutory Scottish Conservative Back Bencher in this debate on Edinburgh. They have obviously been allocated one order each. I know that the hon. Gentleman was a member of the London borough of Bromley, which of course gives him an extensive working knowledge of local government in Scotland. I accept that the hon. Member for Dumfries (Sir H. Monro) was a long-serving member of a council, although his experience ceased 20 years ago, which may impair his knowledge slightly.
Of course, the two Conservative Members who have some knowledge of Edinburgh district council, and Edinburgh corporation, as it used to be, have sat silent on the Front Benches. One might have thought that one of

the two Conservative members who at one time served as local councillors in Edinburgh would have introduced the report. It would have made some sense. I accept that the Edinburgh report is perhaps rather lowly for the Secretary of State; it may be beneath him to take on such a minor task. Furthermore, it is right that he should not have introduced the debate. He would have had to declare an interest because his rates will be cut as a result of the order and he will be better off financially. Perhaps it would have been better, therefore, had the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) made his debut as Parliamentary Under-Secretary of State on this report.

The Secretary of State for Scotland (Mr. Rifkind): He is a ratepayer, too.

Mr. Maxton: I am interested to hear that, because it means that the hon. Gentleman has two homes. My hon. Friend the Member for East Lothian (Mr. Home Robertson) always boasts about the fact that the hon. Gentleman is one of his constituents.

Mr. Donald Dewar: One of his flock.

Mr. Maxton: Yes, one of his flock.
Instead, we had the hon. Member for Galloway and Upper Nithsdale (Mr. Lang) reading from a brief. If he is going to read from badly written brief, he would do better to leave out the rhetorical flourishes, or ask his advisers to do so, and to stick to facts. It would be better to deliver the brief in some style, but the hon. Gentleman failed dismally to do that.
We come to the third of the motions. I want to make the point which has been made on the others. We have come from considering Scotland as a whole, to the region and now to the district, but the argument is true of all three. The Government have no mandate and no democratic right to impose these measures on Scotland, Lothian region and Edinburgh district.

Mr. Bill Walker: Nonsense.

Mr. Maxton: The hon. Gentleman has made his speech. Perhaps he will make another explaining why — [HON. MEMBERS: "No."] My hon. Friends are right, we do not want another. I am sure that the Secretary of State in particular does not want yet another attack on him for the way in which he has handled Scottish business. [AN HON. MEMBER: "Where is Teddy?"]—That is right. Bring back my predecessor, whom the hon. Member for Tayside, North praised so much in his recent article in the Glasgow Herald. The only seat he lost was his own. That was the great success story. I remember him saying to me that the Scottish Tories would get the result they wanted—they would win seats in 1979 and lose Cathcart.
The Government have no mandate in Edinburgh to carry out these provisions. Let us look at the facts on the elections in Edinburgh. The citizens voted for a majority Labour-controlled authority in 1984, for the first time in Edinburgh's history. In 1986, in the regional elections, they again voted overwhelmingly for the Labour party. Despite the fact that all these measures were laid earlier than if we had been continuing without the general election and the fact that the previous Minister with responsibility for local government in Scotland, Michael Ancram, made it clear that, if the rates were cut in Edinburgh and Lothian, the people of those areas would


vote for the Tory party in the 1987 general election, the Edinburgh people voted overwhelmingly yet again for the Labour party. Michael Ancram, who is again calling himself Michael Kerr, Earl of Ancram, laid his political career on the line of his local government ministry and, of course, on the poll tax. Despite the Scottish measures, he lost his seat to my hon. Friend the new Member for Edinburgh, South. That is the way in which the people of Edinburgh, Lothian and Scotland have talked to the Government.
I say to the hon. Member for Tayside, North, yes, in terms of what is a Scottish Office, there is a Scottish mandate. We are dealing with Scottish legislation. If the hon. Gentleman seriously believes that there is no Scottish mandate and no separate Scottish identity within the House of Commons, why is he here tonight talking about Scottish affairs and why does he not argue convincingly, as I am sure he would like to do, that the Scottish Office should be abolished, that all separate Scottish legislation should be abolished and that we should have single United Kingdom Departments? The hon. Gentleman does not argue that because he knows that every Scottish Conservative Member would be wiped out in the next general election. That may well happen anyway, but it would certainly happen in those Circumstances.
Edinburgh has got a good case. It is different, and that should be taken into account when we look at the report. It is the capital city. Despite the Borrell collection, it has more tourist attractions within its boundaries than any other part of Scotland. People flock to it. It is right that we expect the district council of a capital city that is a major tourist attraction to ensure that the streets are clean, that it is properly looked after and that if tourists go into restaurants, cafes and shops they can expect environment and health departments to do their jobs properly and to have inspected such premises. Tourists expect that—all of us expect that.
Conservative Members made great play of the fact that Edinburgh is a major financial sector, yet they will make cuts and ensure that Edinburgh becomes a less attractive place for people to visit, whether they be business men or tourists. That is what they are doing. Yet the Minister, in that badly-read brief, failed to answer the question that my hon. Friends the Members for Edinburgh, Central (Mr. Darling) and for Linlithgow (Mr. Dalyell) made in earlier speeches; if Conservative Members genuinely believe that there is a need to cut the level of money in Edinburgh, what is it that they want Edinburgh district council to cut? Which services or areas have to go? Will it be in the constituency of Pentlands that there will be cuts? If the Minister is to force through measures such as this, he has to take responsibility for the services that will go as a result. I know that the Secretary of State for Scotland and the hon. Member for Edinburgh, West know that once services are cut and are declining, they will be the first to go whingeing to their constituents saying that it is all the fault of the Edinburgh district council and of Lothian region and that it has nothing to do with them. They are totally and utterly irresponsible in the way in which they handle local government in Scotland.
The time has come when we should no longer have a Conservative Government handling local government in Scotland. The time has come when that responsibility, as with everything else relating to Scotland, should be transferred to a Scottish assembly. Tonight shows yet

again the need for that Scottish assembly. I ask my hon. Friends to vote against this report, as they have against the order and the other report tonight.

Mr. Allan Stewart: I agree with the hon. Member for Glasgow, Cathcart (Mr. Maxton) about one thing, and one thing only, and that is about congratulating the three Labour Members who made their maiden speeches.
Tonight's debate was widely advertised as a massive labour onslaught on the Government. But what happened in the last Division? The Government's majority went up from 35 to 81. The Labour Members were persuasive in the last debate — they persuaded about 40 of their friends to go home to bed. That is the level of this great assault on the Government.

Mr. Home Robertson: Will the hon. Gentleman give way?

Mr. Stewart: No, not yet. The hon. Member for Cathcart has just made an interesting speech about the mandate. It will be a speech that will live to haunt the Labour party because he has now committed the Leader of the Opposition and the shadow Cabinet to every word that he said. There is only one mandate, and that is the mandate of the Government of the United Kingdom to win a vote of confidence in the House of Commons. if the hon. Members for Cathcart and for Falkirk, West (Mr. Canavan) do not believe that, they should be honest about their convictions and join the Scottish National party.

Mr. Alex Salmond: Where does this mandate come from?

Mr. Stewart: The mandate comes from the House of Commons of the United Kingdom. I am glad to see that the hon. Member is wearing his St. Andrew's university tie. I am not criticising his position on the mandate, and never have. The Labour party's position in regard to the mandate is at issue.
I represent a constituency that has two district councils; the district council of Eastwood and that of Renfrew. When I mentioned earlier that I represented Eastwood, the hon. Member for Glasgow, Garscadden (Mr. Dewar) accused me of being parochial. It is not parochial to represent one's constituency. It is the first right and duty of hon. Members. Of course, I live in the Glasgow district council area. Many questions may be raised about aspects of the policies that are pursued by the Glasgow district council. I live close to my constituency.

Mr. Dennis Canavan: Surering along with the people.

Mr. Stewart: That is interesting. I suggest that the hon. Gentleman persuades his spokesman of that theory. The hon. Member for Cathcart does not live in Glasgow.
There is a clear difference between the policies of Glasgow district council, which is a Labour council, and Edinburgh district council. There is no doubt that Edinburgh has pursued a deliberate policy of confrontation. That is clearly shown by the planned expenditure of 29·3 per cent. above relative expenditure, and, indeed, by the fact that the council is planning for a real growth in expenditure of 14·5 per cent. The Conservative opposition group in our district has proposed a budget that is within the guidelines. It is a budget that would not mean


widespread job losses, although in a mood of profound common sense, it has recommended that what is called the women's committee be disbanded. There is no doubt also, if ones looks from the west of Scotland to the policies that are pursued by Edinburgh district, that not only in terms of overall figures, but from individual example after example, one can see justification for the report. It contains some large items of expenditure and some small ones.
My hon. Friends will be interested to know that, among the other jobs for the boys that have been put forward by Edinburgh district and some residents, is a job for a writer in residence. There are also proposals to employ a bannermaker in residence in Edinburgh. We all know what the banners will say.

Mr. Tam Dalyell: The hon. Gentleman referred to jobs for the boys. Will he be specific about the matter to which he is referring?

Mr. Stewart: I have specifically referred to the creation of individual appointments, and I shall go on. [AN HON. MEMBER: "List them."] I shall give some other examples. The Labour administration has allocated ratepayers' money in support of what is called the local authority period of action against apartheid. What does that have to do with local government in Scotland? The council's financial commitment has included the production of posters, a photographic exhibition, the costs associated with having an African National Congress speaker at a council meeting, showing a free film for three days, and a guarantee against loss for a concert in the Usher hall. There are proposals for a museum of trade union and Labour history, and the shambles about the canopy in Princes street gardens. It cost £5,000 to take it down, and another £5,000 to put it up again.

Sir Russell Johnston: rose——

Mr. Stewart: The hon. Gentleman has already spoken twice tonight. I am anxious to hear arguments from some other Opposition Members. Edinburgh has the ultimate symbol of the Socialist world of nonsense—a women's committee which wastes ratepayers' money sending out a glossy brochure explaining its work and its so-called achievements. Since the Labour administration took control, the direct labour organisation in Edinburgh has had a rise which can be described as meteoric.
Those are individual examples, but the Labour administration has pressed on with its budget proposals in Edinburgh, having been warned by the council officers that they were likely to be regarded as excessive and unreasonable and could lead to the council being unable to meet contractual commitments following action by the Secretary of State. The council officers further warned that the act of deliberately entering into further obligations in the knowledge of the fact might amount to an act of fraud on the part of councillors and council officers. The source of that information is the Glasgow Herald of 6 March.
That is the background to Edinburgh district council. I am proud to represent a sensible and prudent district council in Eastwood. It is in the interests of local government in Scotland that the House should support this report.

Mr. Ron Brown: This is a very important night for all of us, and when we see the Secretary of State and his minions here we know that we are speaking about the colonial service when we discuss Scotland. We talk about two nations, about the haves and have-nots and obviously about politics. It is a question of them and us. That is certainly true of Edinburgh.
Apart from the silly nonsense that it talked by Conservative Members, if we consider the real issues we realise that Edinburgh is not a high spender. It is a very important and bourgeois city, not just in Scottish terms but worldwide. Edinburgh's councillors have issued a statement which even Conservative Members will have read. They will have met the councillors.
The statement reads:
As the Capital City of Scotland and an international centre, the Council's services have to be provided in a wider context. Much has been made recently of the City's failure to grasp the opportunities which arc now being so actively pursued elsewhere. It is essential that the Council should provide and maintain the highest standards of environment and facilities for the City in its role as the capital of Scotland; as a domestic and business community; as an international cultural venue; as a financial centre and tourist attraction and as the urban centre of East Central Scotland.
The council believes that the Secretary of State has not paid sufficient attention to those factors. Similarly, not enough account has been taken of the policy of the previous Administration of applying insufficient resources to service provision despite a prosperous exterior in Edinburgh. The councillors state their case, but it is clear that the ratepayers and taxpayers have a case to make. They feel strongly about what is happening in Scotland and in Edinburgh. If anyone was wondering about it, Leith is part of Edinburgh. The people of Edinburgh deserve better services and a better deal. They deserve value for money.
Conservative Members should visit Edinburgh, and not regard it simply as somewhere beyond Watford. They should visit it and speak to the people there. We have heard a lot tonight about value for money and about Joe Public. It is clear that tonight the Government are arguing the case for taking back the gains of the past. Labour Governments have at least made the case for creating a social wage and accept that workers cannot simply be labelled as workers. Labour Governments have sought to improve the standard of living and to move forward. It is right to impress on our people the fact that their values are important.
Of course, Conservative Members will say differently. They will say that that is entirely alien to their ideas. Conservative Members will resuscitate the ideas of the past and say, as they have repeatedly said, that we should have guns before butter and missiles before health. Indeed, the Government are themselves a reactionary regime. They want to spend much more on arms. There will be Trident, but there will not be democracy because the Government are clearly not interested in democracy or in providing services. They are interested only in themselves and in their own class interests.
Democracy is elastic, not to be run on a shoestring. It is there to be exploited and to be taken advantage of. I know that the commandants, or Gauletiers, will smile, laugh and joke and say that they have a mandate in Lothian, Edinburgh and Scotland. They will say that they have strength. Indeed, they have tremendous strength


because they can fix the Select Committees and the Grand Committees. They can do many things, including the ritual dance. Perhaps we shall perform it and dance down the stairs and vote with them. The Government can do many things but we shall lose the vote although we have 50 Scottish Members to reflect Scottish opinion.
The system here is unfair, corrupt, inefficient and dangerous. It is unfair because wealth is concentrated in decreasingly few hands. It is corrupt and I think of the Guinness family, all sorts of insider trading and the inefficiency of so-called British enterprise which produces fewer and fewer goods. An almighty deficit is looming towards the Government. Obviously, that is dangerous. The Government's only investment is not in local or national government, but in the arms race. That is certainly true. Bit by bit it is true. The Government can go to war to win all sorts of elections and they may have won the Falklands war, but they have not won an election in Scotland. They have not conned the people of Scotland. They may decide to regenerate the class war and, naturally, it will continue. Clearly, it is important to recognise that. When we discuss these matters in this bourgeois place we must not just listen to one point or another, but ask ourselves, "What is to be done?" My comrades and I will say, "Yes, the Government are wrong", but then we must say to ourselves "Dinna greet in yer beer." Many hon. Members will leave the Chamber, go downstairs and greet in their beer. We must say, "This Government must be challenged, but not by a Social Democratic party, mark 2", although that may unfortunately happen. All the trendies will come in to prove their point. But that will not change matters or convince people. Indeed, it will make matters worse. If we are to win the next election we must get back to basics. The Labour party must base its organisation on class politics. We can banter, but it is a question of getting back to basics. It is a question of taking politics back to street corners, factory gates, shipyards, shops, offices and hospitals. That is what we must do.
Clearly. if this is the den of thieves, as Lenin said—the Scottish TUC made this point—the triple alliance of the unions, COSLA and the Labour party can challenge the system and the Government. We are a tremendous force, but we must be organised. It is a question of bringing people together. [Laughter.] Such talk in this place is a laugh, a big joke, but if there is a will, we can organise people in the various towns, villages and hamlets in Scotland, England, Wales and Ireland.
Is that possible in the Labour party? I always contend that the Labour party thinks about resolutions, phraseology and words. I always believe in backing words with action. Repeatedly we have the opportunity to organise and fight back. That is the important thing. The Opposition may laugh, but that is their worry.

Hon. Members: The hon. Gentleman is part of the Opposition.

Mr. Brown: Is the Conservative party the opposition? Some people would say different.
In Scotland we will argue for an assembly. However that means nothing without Socialist policies. At the end of the day we need Socialist policies to take over the commanding heights of the economy. What is local government without organisation and without Socialist policies? We may have a banana republic, but that will not

solve the problems. We need Socialist policies in Scotland, England or where ever. That is why we need Scottish. Irish, Welsh and English workers to join together. We need to organise.
We can laugh and joke and it is a great night for that. It is the end of term at the English public school. However, back home, in the real world, people will not accept the phrase "Class dismissed". We must organise and fight back. That will happen. People should not be fooled.
Consider the history of the Scottish working class and especially the role of John Maclean. Maclean made it clear that Parliament is, in many respects irrelevant. Whatever our jokes and fun, it is a question of organisation and fighting back. The working class must challenge this and other Governments. The unemployed and employed will fight together. Democracy will prevail, but good democracy cannot prevail unless the people outside fight hack. We shall encourage that fight.

Mr. Bill Walker: The speech by the hon. Member for Edinburgh, Leith (Mr. Brown) was thought-provoking. On the Conservative Benches it certainly provoked the thought that the only chap who understood what was being said was the hon. Member for Leith. Looking at the hon. Gentleman's colleagues it is clear that even they, try as hard as they might, could not find it in themselves to support much of his speech. That lack of support might possibly be due to the fact that, in common with my hon. Friends, the Opposition could not follow the hon. Gentleman's rambles.

Mr. Andrew Faulds: Some of us listened to the speech of my hon. Friend the Member for Edinburgh, Leith (Mr. Brown). That speech may not have been remarkable for its clarity, but it was remarkable for its care and concern about the real issues.

Mr. Walker: If the hon. Member for Warley, East (Mr. Faulds) believes that the only people who care about Scotland are those who ramble, he does a great disservice to his Front Bench.

Mr. Nicholas Fairbairn: rose——

Dr. Norman A. Godman: Here he is—the president of the Ramblers Association.

Mr. Fairbairn: Does my hon. Friend appreciate that one reason why the actor who just intervened was capable of appreciating the speech of the hon. M ember for Edinburgh, Leith (Mr. Brown) was that he walked in four fifths of the way through?

Several Hon. Members: rose——

Mr. Walker: I can give way to only one hon. Member at a time.

Mr. Faulds: We do not expect the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) always to be terribly clear about what is going on. He has moments of temporary—sometimes near permanent—amnesia. He is wrong. I was here at the beginning of the speech. I went out for reasons that I shall not explain. We all hive the call of nature—even the hon. Gentleman. He perhaps, more often than most. I came back and listened to the rest of the speech. I heard most of it. I wish the hon. aid learned Gentleman would occasionally get things right.

Mr. Deputy Speaker (Sir Paul Dean): Order. Hon. Members have enjoyed the pleasant interlude, but let us return to the debate.

Mr. Walker: I am at a loss to understand the intervention by the hon. Member for Warley, East. Anyone who had listened to all of the speech by the hon. Member for Leith would realise that it is not unreasonable for me to say that he rambled a bit. I never suggested that Opposition Members do not care. However, sometimes they care about the wrong things in the wrong way and sometimes they do not understand that to Government Members, caring means doing that which is right for all of the people. The hon. Member for Leith has had his opportunity to ramble——

Mr. Ron Brown: What I object to is the class interest of Conservative Members which destroys living standards, makes people unemployed and has many other unfortunate features. In a humorous way, the hon. Member suggests that what I say should be challenged. If he would understand reality and try to do something about it, I would listen. But he is such a Thatcherite that there is no question of his accepting humanity. Humanity is for our side, not his.

Mr. Walker: The hon. Gentleman made a lengthy interjection. When he reads what he said in Hansard he will realise how wrong he is. Does he not realise that we have representatives from all walks of life? We represent every sector in the community. We represent every walk of life; we represent every socio-economic group. We find it offensive that the hon. Member for Leith thinks that he is the only one who understands the aspirations of ordinary working people. That is bunkum and nonsense. To suggest that because we want to do things differently, we do not care or do not understand, is to bring debate in the Chamber to the lowest level.
I now refer to the hon. Member for Glasgow, Cathcart (Mr. Maxton). I have been trying hard to get to him, because again he came up with the business of the mandate. If he ever aspires to be a member of a Government and sit on the Government Benches, he must think carefully about what he is saying. If he is saying that if any part of the United Kingdom, whether it be Scotland, England, Wales or Northern Ireland, returns a preponderance of hon. Members of one party it can somehow declare that there is no mandate, he must recognise that he is denying the right of himself and his party ever to sit on the Government Benches.
I know that that is not the aspiration of most of those who want to sit on the Government Front Bench. They would like to form the Government. When they do so and introduce orders of the type that they judge are necessary to operate their policies, they will expect support from all the members of their party so that they can get their measures through. We in the Conservative party understand that. It is time that the hon. Member for Cathcart realised that he must be sure of exactly what he is doing on behalf of his party and of the commitments that he is entering into, because he speaks from the Front Bench on behalf of his party——

Mr. Geoffrey Dickens: Does my hon. Friend accept that so many English, Scottish and Welsh Members are present in the House of Commons as we approach 3 am because we care

about Edinburgh? We care that the taxpayers of the United Kingdom are having to pick up the bill. We care that the ratepayers of Edinburgh are having to pick up the bill. That is why we are prepared to stay here at Westminster into the small hours of the morning, to fight against the Left-wing council in Edinburgh.

Mr. Walker: I thank my hon. Friend for that helpful intervention. There is no doubt that it is because we care that we are all here. It may be that the reasons for caring are different—often they are—but no one can deny that we are here because we care. Perhaps some of us are here because Government or Labour Whips may not take kindly to our absence. Others, such as myself, are here because we feel that we must make a contribution to this important debate and say what we believe to be essential. Much of our debate tonight has concentrated——

Mr. Canavan: Will the hon. Gentleman give way?

Mr. Walker: I am always delighted to give way to the hon. Gentleman.

Mr. Canavan: The hon. Gentleman is making great play of the United Kingdom mandate. I suppose that the Tory definition of the United Kingdom is a voluntary union between what was originally four nations, but that is nonsense, because the people of Scotland were never democratically consulted about the union in the first place. At the general election, 76 per cent. of the people of Scotland voted for parties that were committed to set up a Scottish assembly or parliament of one form or another. Does the hon. Gentleman accept that the people of Scotland, like those of any of the nations of the world, are entitled to as much self determination as they want, and even to disunite this Parliament if it comes to the crunch?

Mr. Walker: I understand that the hon. Gentleman used to be a mathematics teacher. If he had been a history teacher he could not have told his pupils about modern history; otherwise he would have had great difficulty explaining to them how Labour Governments have governed the country since 1945 without a majority in England. Whatever the hon. Gentleman thinks, every hon. Member who stood for election—including members of the Scottish National party— did so to the unitary Parliament. The difference between Scottish National party members and Labour party members is that the former have never made any secret of their desire; at least, that is honest. The hon. Gentleman wants to have his cake and eat it. He cannot come to the House when a Labour Government have a majority in the United Kingdom Parliament and say that they will govern on Labour party lines——

Mr. Deputy Speaker: Order. There has been a number of incidental references to these matters in nearly every speech, but the hon. Gentleman is now straying well away from the report. He must address his remarks to the report concerning Edinburgh.

Mr. Walker: I had no intention of going into that area; I was replying directly to an intervention. If you, Mr. Deputy Speaker, read the debate tomorrow, you will see that the suggestion was that the Government had no mandate to introduce the report tonight. I was merely drawing attention to the fact that many reports passed through Parliament in the past. Labour Governments that


put through reports relating to England were in exactly the same position with regard to a mandate as the Government are tonight. There is no way in which——

Mr. Fairbairn: It is suggested that there was no mandate for the Act of Union. Were the Canavans about in Scotland at the time of the Act of Union to take part in such a matter?

Mr. Deputy Speaker: We are not discussing the Act of Union. We arc discussing a report that concerns Edinburgh, and I am sure that the hon. Gentleman will address himself to that.

Mr. Walker: We all hope that the report relating to Edinburgh district council will be the last of its kind that we shall ever have to face in this Parliament, because this is the third successive time that this has occurred with Edinburgh district council. That cannot be good for it or for this Parliament. We hope that the community charge will make people think carefully and clearly, knowing as they do, that they will have to pay for the expenditure for which they vote.
One of the reasons for the noises that we hear from the Opposition against what will happen in the future—as against what is happening tonight—is that they know that the community charge will be a wholly different ball game at local government level. No more will Edinburgh district council spend, and propose to spend—had not the report been brought in—ratepayers' and taxpayers' money on a basis that is judged by central Government to be wholly unacceptable. We must recognise that the laws of this country are made in this House and in another place. We are a United Kingdom.

Mr. Canavan: Four countries are represented here.

Mr. Walker: If the hon. Gentleman is suggesting that the House does not pass legislation for a country of which we are both proud to he members, we will just have to disagree, as we so often do. It is in this House and the other place that legislation which affects Edinburgh and Scotland is passed. It is not made in Edinburgh.

Mrs. Maria Fyfe: On a point of order, Mr. Deputy Speaker. When will the hon. Gentleman start to talk about Edinburgh's rate cut?

Mr. Walker: I have tried to talk about Edinburgh, but I have had to respond to Opposition Members' interventions. The hon. Lady will learn that this is a Chamber for debate, and the essence of debate is response to what the other side of the House says.
Edinburgh council has complained that it has no reserves on which to draw and that it is unable to borrow to finance its planned expenditure. It claims that those factors have contributed to its planned rate increase. Anyone who studies the matter knows that Edinburgh's creative accounting and its choice to live now and pay later has caught up with it.
No Government would allow what has been going on in Edinburgh to continue. This is the third time that a problem has arisen. Nor is it as though the council's additional expenditure is on services. It has indulged in what one might call odd activities. It decided, as my hon. Friend the Member for Eastwood (Mr. Stewart) said, to have an artist in residence.

Mr. Canavan: What is wrong with that?

Mr. Walker: There we are; I am asked what is wrong with that. It is claimed that priority areas of housing are starved of resources.

Mr. Canavan: The Queen has a poet laureate.

Mr. Walker: Nor do I know what the writer in residence will do. I am sure that the people of Edinburgh who have dampness in their houses will find it difficult to understand what a writer in residence, at a salary of about £8,000, will do for them. My hon. Friend the Member for Eastwood mentioned the action against apartheid. Why should a council that is allegedly strapped for cash spend £7,000 on that, especially when it has been warned by its own legal officers that that is likely to he regarded as excessive and unreasonable expenditure, thus leading to confrontation with the Secretary of State.
Council officers also warned that entering into other obligations might be construed as an act of fraud by councillors. That is serious. It was reported in the Glasgow Herald, to which the hon. Member for Cathcart referred, so it must be important, although it is not the most widely read paper in my constituency — [Interruption.] The hon. Member for Warley, East who, I gather, treads the boards, seems to be feeling like treading them again. I can hear his loud voice from the back.
There can be no doubt that any Parliament sitting at 2.30 am to debate whether it is wise to take action against Edinburgh district council would realise that there is something seriously wrong with the way in which we finance and support local authorities. I am happy to support the Government, because I know that when we have the community charge and people consider how to vote in local elections, we shall never again he faced with such a motion.

Mr. Brian Wilson: As a new Member, I think that the events of the past hour have been a disgrace, an embarrassment and a pathetic farce in the name of democracy.
If the Tories on the Government Front Bench think that they will be able to run the affairs of Scotland with the aid of the motley crew of unemployables that we have listened to tonight, they have another think coming. The hon. Member for Eastwood (Mr. Stewart) said that there is only one mandate. There is the voice of the obscurantist and the reactionary. If the hon. Gentleman believes that what we have been hearing is the one mandate that matters in Scotland, he also has another think coming.

Mr. Julian Brazier: Will the hon. Gentleman give way?

Mr. Wilson: No. I will not give way. We have listened to quite enough nonsense already.
We are not talking about the idiotic debating points made by halfwits from Perth over the past hour and a half; we are talking about the living standards of the people of Edinburgh. We are talking about poor people, about housing conditions and about the fundamentals of democracy. When I hear this alleged democratic debating Chamber reduced to the trivia and idiocies of Conservative Members, I object, not just as a Scot and a Socialist, but as a democrat.
We are talking about democracy and about the Conservative party which has the grossest and utmost contempt for the ballot box — unless it gives an


acceptable answer. Tories despise the democratic outcome, yet prate about democracy in debates such as this. We are talking about the centralisation of decision-making and the taking of power from local authorities. I do not believe that that centralisation is even in the Tory tradition. It is in an anti-democratic tradition in which the bollot bax becomes the tool of authoritarianism rather than the master of those who temporarily hold power.
I do not believe for a moment that there is any mandate for what has been done to Lothian and Edinburgh. If anyone in this United Kingdom believes that there is only one mandate—the mandate of the House of Commons —and ignores every other mandate at every other level of government and ignores the different dimensions of the United Kingdom, he is playing with fire.
When clowns such as the hon. Member for Tayside, North (Mr. Walker) and drunks such as the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) ——

Mr. Deputy Speaker (Miss Betty Boothroyd): Order. That is unparliamentary language and I must ask the hon. Member to withdraw that word.

Mr. Wilson: I withdraw the word.
The contempt with which the affairs of Edinburgh and Lothian have been treated tonight by Conservative Members is beyond forgiveness. I hope that Hansard will be read more widely than usual in Scotland over the next few days, because the speeches of Tory Members have been a disgrace and an affront to democracy.
Some people believe that the only mandate in Britain comes from the election of a central Government and that every other dimension of democracy can be ignored. The devastation that the Conservatives leave behind will remain long after they have been consigned to the ash pit of political life. They will leave behind them devastation if they undo the work of 280 years; if they undo the idea of the United Kingdom as a progressive force. If they are blind and obscurantist and refuse to accept the verdict of 11 June and refuse even to accept that there are different dimensions to the verdict of 11 June they will commit terrible acts of ignorance and stupidity. The glib lawyers on the Government Front Bench may laugh and sneer and enjoy the passing moment, but that has a legacy and it will be paid.
I think I know why Edinburgh is chosen for these motions and this treatment. It is chosen because the Scottish Tories believe that Edinburgh and Lothian should be theirs. They think that this is a precinct within which they should have divine rule. They despise the fact that the electorate through the ballot box, which the Opposition respect, have given another verdict. The people who voted for Labour councils in these areas are to be punished.
There is an odd relationship between the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind) and the Mekon of Edinburgh politics, Mr. Brian Meek. I should like to quote from an article in the Glasgow Herald. Mr. Meek deals in hagiography of a very unusual kind which, by comparison, makes Uriah Heep seem like an ascerbic critic. Writing about the right hon. and learned Gentleman's election campaign, he says:
It starts to go horribly wrong at about 3 pm sitting in the car in Braidburn, MR is using the portable telephone … Outside, a child stares in wonder as he recognises the man making the call.

The third message comes from Logan Cotter, the party's press officer and it gives details of a System Three poll in South Edinburgh to be published in the Glasgow Herald, Rifkind is stunned, knocked back in a way I have never seen before.
'Let's go back to the office,' he says. For half an hour we sit trying to make some sense of it all. Is it an isolated instance, is there some trend, what the hell is happening?
What has this got to do with the report? Wait for the next paragraph.
'"Poor Michael, (Ancram)' says Malcolm, genuinely concerned. 'This is a cruel business.' I have the feeling it is going to become even harder.
There is slightly slightly better news the next day. The article says:
"Saturday, May 30
NO LACK of enthusiasm at the Balerno fete …
Where does Mr. Meek come into it? Mr. Meek has duties to perform. Mrs. Rifkind enters the scene. The article says:
At 9.15 pm she has had no supper but stops the car when she sees a tiny Rifkind sticker in a top flat window. 'They should have a bigger poster.' 'Go home.' I told her. 'I'll do it.'
The Secretary of State for Scotland then spends the next two hours on his knees stapling his name onto sheets of cardboard.
Mr. Meek, Tory leader of Lothian regional council says:
I organise people to put them on lampposts.
Then comes the denouement, the eve of poll meeting at Colinton. Mr. Meek reports that Mr. Rifkind:
gives a brilliant impromptu performance, turning hostile questions into own goals.
Apparently in the Conservative party turning hostile questions into own goals is a virtue. Now we come to the crunch, and this is very relevant to the report.
Not for the first time
writes Mr. Meek,
I am genuinely proud of this young man whom I encouraged to come into politics.
I suggest that in the vendetta that is being conducted against Lothian and Edinburgh on behalf of the Conservative party, debts are being repaid. The Edinburgh Tories are being shored up in this place in an undemocratic manner by MR, the man on the portable telephone who is lauded in the article. At the expense of poor people, decent people and democratic people in Edinburgh and Lothian, a vicious political campaign is being waged without any regard for their best interests.
An apology for democracy is before the House, and the interests of our people can be swept aside with sneers, gibes and laughter, along with all the clowning and buffoonery that we have seen over the past few hours. At least Mr. Meek had the honesty to acknowledge the outcome of the general election in Scotland. After the Secretary of State's great victory has been proclaimed, Mr. Meek writes :
But other heads are rolling all over Scotland. Micky, Anna, Gerry, Alex, Albert"—
my opponent, poor old John, is not even mentioned—
all gone, and Alex and Michael disappearing before our very eyes. I have to tell him that there is a recount at Ayr.
That was the lesson of 11 June.
The Government have introduced punitive measures against Edinburgh and Lothian. They did so on the eve of the election with a view to gaining political capital through the ballot box. Despite the mockery of democracy that we see in this place, the ballot box is still the instrument of democracy. The people of Edinburgh and of Lothian still have the right to elect local authorities, reject electoral bribes and dismiss what the Government are now doing as part of a political package. If there were decency and democracy in this place, the measure that is before us


would be rejected. If the Government continue to treat the people of Edinburgh, Lothian and Scotland generally—indeed, everywhere that did not vote Tory—with the contempt, disdain and idiocy that we have witnessed tonight, the worm will turn, and in a big way. I shall not seek to defend the Mother of Parliament when there are imbeciles on the Government Back Benches reducing the serious issues that have been under discussion to the lowest of levels.

Mr. Tam Dalyell: Does the Minister agree with Edinburgh district council that the expenditure per head of population in Edinburgh that is proposed for 1987–88 is substantially less than that proposed for Glasgow? Edinburgh's 1987–88 expenditure per head will be £110·83, which will be less than the £117·30 that Glasgow was spending per head in 1978–79. Is that true or is it not?
Two of the five comparators, Glasgow and Dundee, have rate poundages that are substantially greater than Edinburgh's declared rate. Edinburgh is 19p, and after selective action that comes to 16·2p. Glasgow is 27·5p and Dundee is 22p. I ask the Minister to check with those who occupy the Box, who are experts in these matters, whether those figures are true or false.
Edinburgh is criticised for increasing staff levels, but the number of staff per head of population is less than in any of the comparators. The figures are as follows: Edinburgh, 11·1; Dundee, 16·4; Aberdeen, 14·2; Falkirk, 12·6; Glasgow, 17·5; and Carrick, 12·3. I represent south Queensferry, which is part of the Edinburgh district. The manner in which Edinburgh district council and its officials have dealt with difficult matters such as housing and what has happened over VAT 69 and the reconstruction work has impressed me greatly. I do not say that in a partisan spirit.
It is claimed in addition that Edinburgh's 1984 rate was at an artificially low base—a product of years of low spending on services. Even in 1986–87, Edinburgh's rate was lower than that of 24 other district councils in Scotland. Do the Government accept that figure? With a low base rate poundage, any increase is bound to sound exaggerated in percentage terms. However, the average ratepayer will pay an extra 62p per week as a result of the 4·3p increase. Seventy-five per cent. of households will face an average weekly increase of less than 75p and only 11 per cent. of households—those with rateable values ofover £1,200—will pay more than £1 a week extra to the district council. Some 40·6 per cent. of the Scottish population will this year face a district rate poundage greater than or equal to that of Edinburgh.
I keep my speeches short. As on the previous motion, we are dealing with facts here. I have given the statistics that Edinburgh district council and its officials have produced. I ask the same question: are they true or false? If they are wrong, the Government should say so. If they are true, what on earth are the Government doing introducing a motion such as this?

Mr. Calum A. Macdonald: The Government argue that the motion is necessary to punish and discipline spendthrift Labour councils. I represent a constituency governed by a council that is neither spendthrift nor Labour. It is not a Labour council because

it is formally non-political, and it is not spendthrift because it has kept within the guidelines imposed by the Government ever since they were introduced. In fact, it is just the kind of local authority that the Government would like Edinburgh to be.
What has been the council's reward for its double virtue? What has been the result for the Western Isles? It has been declining services, lost jobs, roads falling into disrepair, schools squeezed by lack of resources, a chronic lack of home helps and other social services and council rents which have been among the highest in Scotland for the past seven or eight years.
Things have not got better as a result of my council's following the guidelines. Every year they have got worse. The route recommended by the Government for Edinburgh district council and for Lothian regional council leads not to nirvana but to a crisis of services such as we are suffering in my constituency. That is why my constituency and the Western Isles council are standing four square with Edinburgh district council and Lothian regional council against the Government.
Lost jobs, declining services, attacks on local democracy, are all fine phrases, but what do they mean in practice for the people whom they affect? Let me give one example drawn from my constituency. I know of a brother and sister in my constituency who live together in the same house and suffer from a crippling and incurable illness. They want to live at home. They have a lively and bright interest in the croft on which they live and which they own. Much of the work is done for them by neighbours. To stay at home, they need a great deal of help and attention. During the day, they need help to look after the house and to cook meals. At night, they need help getting to bed. In the morning, they need help to get up. They need more help than even the best-meaning neighbours can provide. In short, they need social services.
There is a will and desire in the Western Isles to help this couple and couples like them. But we cannot help them because of the cuts in the social services budget, enforced by the Secretary of State for Scotland. The cuts mean that these two people are likely to have to leave the home in which they want to remain and go into institutional care. This shows that the Government's statement about community care is the humbug it is. We are talking about exactly the same principles in the motion.
If my people in the Western Isles want to help this couple and provide this service and are willing to dig into their pockets to pay for that service with their rates, how dare the Secretary of State tell them that they cannot provide it? That is not a rhetorical question. I hope that I will get an answer from the Government. I have a letter from this couple. They want to know why they cannot get the support that would allow them to stay in their home and not be forced into institutional care. The people of the Western Isles, Edinburgh district and Lothian region believe in these services because they believe in being good neighbours. It is a disgrace that the Secretary of State and the Government should interfere with their will to be good neighbours to each other.

Mr. Lang: With permission, Madam Deputy Speaker, I should like to reply to this interesting debate.
The issues are clear, Edinburgh is planning spending well above its guideline, its assessed need and its


comparators, and well above previous years. Edinburgh's rates have gone up by nearly 30 per cent. Against that background, should my right hon. and learned Friend the Secretary of State use his power to propose a rate reduction, or should he simply stand by? Put in those terms, I believe that the question answers itself. No responsible Government could ignore overspending of this kind. It runs against the Government's overall economic policy and it has severe effects on local ratepayers. This is particularly true when one bears in mind that Edinburgh's ratepayers are blessed with a regional council which has also increased its rates by 30 per cent.
The House may be interested to hear the benefits to Edinburgh ratepayers of the reduction which we have already approved for Lothian and will, I hope, shortly approve for Edinburgh. The average domestic rate bill will fall by nearly £51, and many householders will benefit by more than that. I should have thought that the Opposition with their professed concern for local taxpayers — at least under the new system—would welcome that.

Mr. Maxton: Will the hon. Gentleman give way?

Mr. Lang: No, I am sorry, but I shall not give way. There are only three minutes left.

Mr. Maxton: Will the hon. Gentleman give way?

Mr. Lang: No, I will not. I have to reply to the debate. I am sorry.

Mr. Deputy Speaker: Order. The Minister is not giving way.

Mr. Lang: For commercial and industrial ratepayers the savings will be significant. A department store in Princes street will save over £60,000 and a manufacturer in the north of the city nearly £17,000. I should have thought that the Opposition with their professed concern for jobs, would welcome that.
The hon. Member for Glasgow, Cathcart (Mr. Maxton) referred in his opening speech to the fact that Edinburgh is unique. Certainly, it is. It is a remarkable place, but it is made unique in the context of this debate by the fact that its budget for 1987–88 is 24·7 per cent. over guideline compared with an average for districts other than Edinburgh and Clackmannan of 3.3 per cent.

Mr. Maxton: Will the hon. Gentleman give way?

Mr. Lang: Its budget for 1987–88 is 29·3 per cent.—

Mr. Maxton: rose—

Mr. Deputy Speaker: Order. The Minister is not giving way.

Mr. Lang: I am trying to reply to the points raised by the hon. Member for Cathcart in his opening speech. Edinburgh's budget for 1987–88 is 29·3 per cent. over assessed need compared with an average of 6·9 per cent. for districts other than Edinburgh and Clackmannan. The hon. Gentleman made much of the mandate. That argument was developed later in the debate, but I sense that the feeling of the House is that the issue has been fairly well discussed and is not strictly relevant to the subject before us, so I will not dwell on that.
The hon. Member for Cathcart asked us which services need to be cut. I point out to him that, after the action proposed by my right hon. and learned Friend, Edinburgh

district will still be 3·3 per cent. above its guideline and 7·1 per cent. above its assessed need. I draw his attention to the plans that the district council has. It is not planning cuts so much as increases. It is planning an increase of £ 1·6 million, or 15·9 per cent., on leisure and recreation; 5·5 per cent. on cleansing; 11·6 per cent. on museums, libraries and galleries; and 7·1 per cent. on central administration —increases overall of 14·5 per cent. in volume terms. So we are not talking about cuts, we are talking about proposed increases that may not be able to go so fully ahead.
My hon. Friend the Member for Eastwood (Mr. Stewart) gave a number of examples of expenditure which, by no stretch of the imagination, could the House regard as essential. The hon. Member for Cathcart also referred to the special needs of Edinburgh that arise from tourism. Of course, that does create special needs, but the assessment of relative expenditure needs takes account of tourism where appropriate — for instance, assessments for refuse disposal, street cleaning, environmental health, and leisure and recreation. Despite this, Edinburgh is budgeting to spend nearly 30 per cent. over its assessed need.

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14 (Exempted Business).

The House divided: Ayes 173, Noes 83.

Division No. 22]
[2.56 am


AYES


Alison, Rt Hon Michael
Currie, Mrs Edwina


Allason, Rupert
Davies, Q. (Stamf'd &amp; Spald'g)


Amess, David
Davis, David (Boothferry)


Amos, Alan
Day, Stephen


Arbuthnot, James
Devlin, Tim


Arnold, Jacques (Gravesham)
Dickens, Geoffrey


Arnold, Tom (Hazel Grove)
Dicks, Terry


Ashby, David
Douglas-Hamilton, Lord James


Aspinwall, Jack
Dover, Den


Atkins, Robert
Dunn, Bob


Atkinson, David
Durant, Tony


Baker, Nicholas (Dorset N)
Evans, David (Welwyn Hatf'd)


Baldry, Tony
Fairbairn, Nicholas


Batiste, Spencer
Fallon, Michael


Bennett, Nicholas (Pembroke)
Favell, Tony


Benyon, W.
Fenner, Dame Peggy


Bevan, David Gilroy
Field, Barry (Isle of Wight)


Biggs-Davison, Sir John
Forsyth, Michael (Stirling)


Bonsor, Sir Nicholas
Forth, Eric


Boscawen, Hon Robert
Freeman, Roger


Boswell, Tim
French, Douglas


Bottomley, Peter
Gale, Roger


Bowden, Gerald (Dulwich)
Garel-Jones, Tristan


Bowis, John
Gill, Christopher


Braine, Rt Hon Sir Bernard
Goodhart, Sir Philip


Brazier, Julian
Goodson-Wickes, Dr Charles


Bright, Graham
Gow, Ian


Brooke, Hon Peter
Gower, Sir Raymond


Bruce, Ian (Dorset South)
Greenway, John (Rydale)


Buchanan-Smith, Rt Hon Alick
Gregory, Conal


Burns, Simon
Griffiths, Peter (Portsmouth N)


Burt, Alistair
Gummer, Rt Hon John Selwyn


Butterfill, John
Hamilton, Hon A. (Epsom)


Carlisle, Kenneth (Lincoln)
Hamilton, Neil (Tatton)


Carrington, Matthew
Hampson, Dr Keith


Carttiss, Michael
Hannam, John


Cash, William
Hargreaves, A. (B'ham H'll Gr')


Chope, Christopher
Hargreaves, Ken (Hyndburn)


Clark, Dr Michael (Rochford)
Harris, David


Conway, Derek
Hayes, Jerry


Coombs, Anthony (Wyre F'rest)
Hayhoe, Rt Hon Sir Barney


Coombs, Simon (Swindon)
Hayward, Robert


Cran, James
Hicks, Mrs Maureen (Wolv' NE)






Hind, Kenneth
Rost, Peter


Holt, Richard
Ryder, Richard


Howarth, Alan (Strat'd-on-A)
Sackville, Hon Tom


Howarth, G. (Cannock &amp; B'wd)
Scott, Nicholas


Howell, Ralph (North Norfolk)
Shaw, David (Dover)


Hughes, Robert G. (Harrow W)
Shaw, Sir Michael (Scarb')


Hunt, David (Wirral W)
Shephard, Mrs G. (Norfolk SW)


Hunt, John (Ravensbourne)
Shepherd, Colin (Hereford)


Irvine, Michael
Shepherd, Richard (Aldridge)


Jack, Michael
Sims, Roger


Janman, Timothy
Smith, Tim (Beaconsfield)


Jessel, Toby
Speed, Keith


Jones, Gwilym (Cardiff N)
Speller, Tony


Jones, Robert B (Herts W)
Stanbrook, Ivor


Kellett-Bowman, Mrs Elaine
Stern, Michael


Knight, Greg (Derby North)
Stevens, Lewis


Lang, Ian
Stewart, Allan (Eastwood)


Lennox-Boyd, Hon Mark
Stradling Thomas, Sir John


Lightbown, David
Summerson, Hugo


Lilley, Peter
Taylor, Ian (Esher)


Lloyd, Peter (Fareham)
Temple-Morris, Peter


Lord, Michael
Thompson, D. (Calder Valley)


Mans, Keith
Thompson, Patrick (Norwich N)


Martin, David (Portsmouth S)
Thorne, Neil


Monro, Sir Hector
Thurnham, Peter


Morrison, Hon C. (Devizes)
Tracey, Richard


Neale, Gerrard
Twinn, Dr Ian


Neubert, Michael
Viggers, Peter


Nicholls, Patrick
Waddington, Rt Hon David


Nicholson, David (Taunton)
Walden, George


Nicholson, Miss E. (Devon W)
Walker, Bill (T'side North)


Page, Richard
Waller, Gary


Paice, James
Warren, Kenneth


Patnick, Irvine
Watts, John


Patten, John (Oxford W)
Wells, Bowen


Pawsey, James
Wheeler, John


Peacock, Mrs Elizabeth
Widdecombe, Miss Ann


Porter, David (Waveney)
Wilkinson, John


Powell, William (Corby)
Wilshire, David


Raffan, Keith
Wood, Timothy


Raison, Rt Hon Timothy
Yeo, Tim


Redwood, John



Rhys Williams, Sir Brandon
Tellers for the Ayes:


Riddick. Graham
Mr. David Maclean and Mr. Stephen Dorrell.


Rifkind, Rt Hon Malcolm



Roberts, Wyn (Conwy)





NOES


Armstrong, Ms Hilary
Barnes, Harry (Derbyshire NE)


Ashley, Rt Hon Jack
Battle, John





Beith, A. J.
Lewis, Terry


Blunkett, David
Livingstone, Ken


Boateng, Paul
McAllion, John


Bray, Dr Jeremy
McAvoy, Tom


Brown, Gordon (D'mline E)
McCartney, Ian


Brown, Nicholas (Newcastle E)
Macdonald, Calum


Brown, Ron (Edinburgh Leith)
McFall, John


Campbell-Savours, D. N.
McKay, Allen (Penistone)


Canavan, Dennis
McKelvey, William


Clarke, Tom (Monklands W)
McLeish, Henry


Cook, Robin (Livingston)
McTaggart, Bob


Dalyell, Tam
McWilliam, John


Darling, Alastair
Marshall, David (Shettleston)


Davis, Terry (B'ham Hodge H'l)
Martin, Michael (Springburn)


Dewar, Donald
Maxton, John


Doran, Frank
Michael, Alun


Dunnachie, James
Millan, Rt Hon Bruce


Eadie, Alexander
Moonie, Dr Lewis


Ewing, Mrs Margaret (Moray)
Mowlam, Mrs Marjorie


Faulds, Andrew
Nellist, Dave


Foster, Derek
O'Neill, Martin


Foulkes, George
Patchett, Terry


Fyfe, Mrs Maria
Pike, Peter


Galbraith, Samuel
Prescott, John


Galloway, George
Reid, John


Godman, Dr Norman A.
Robertson, George


Golding, Mrs Llin
Ross, Ernie (Dundee W)


Graham, Thomas
Salmond, Alex


Grant, Bernie (Tottenham)
Skinner, Dennis


Griffiths, Nigel (Edinburgh S)
Strang, Gavin


Grocott, Bruce
Vaz, Keith


Henderson, Douglas
Wall, Pat


Hogg, N. (C'nauld &amp; Kilsyth)
Welsh, Michael (Doncaster N)


Home Robertson, John
Wilson, Brian


Hood, James
Wise, Mrs Audrey


Hughes, John (Coventry NE)
Worthington, Anthony


Hughes, Robert (Aberdeen N)
Wray, James


Ingram, Adam



Johnston, Sir Russell
Tellers for the Noes:


Kennedy, Charles
Mr. Allen Adams and Mr. Dick Douglas.


Lambie, David



Leadbitter, Ted

Question accordingly agreed to.

Resolved,
That the Rate Reduction (City of Edinburgh District) 1987–88 Report, a copy of which was laid before this House on 10th July, be approved.

Opren

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Garel-Jones.]

Mr. Jack Ashley: Thalidomide was the drug disaster that devastated the lives of young children, shocked the public, and led to revolutionary changes in our approach to drug testing. Many people expressed the hope, "Never again".
Opren is another drug disaster, one that has mainly hit those at the other end of the age group—old people. Although their suffering has yet to capture the imagination of people, I believe that it will lead to an equally important revolution — this time about the methods of paying compensation for drug damage.
The battle for compensation for victims of the drug Opren highlights the cost and the strain involved in such struggles. I note the claim of Mr. Richard Bailey, the British managing director of Eli Lilly, that it is a caring, responsible pharmaceutical company which is concerned to do the right thing. I am not optimistic. This is a compay with an appalling record for integrity. The Amerian Food and Drug Adminstration, the drug watchdog, issued no fewer than 20 summonses against it, incuding one for not disclosing 26 deaths due to Opren. The company accepted fines rather than fight the charges and be publicly exposed. This is the company whose statiticians stressed that an unusually high incidence of adverse reactions among elderly people taking part in trials was not statistically significant. In fact, it was significant and, had this been recognised earlier, much suffering could have been avoided.
The Government also claim to be caring and responsible. I await action which shows their determination that British victims of Opren should get the same consideration as United States victims, who have now been paid. There are several reasons why the Government should intervene. The first is the scale and intensity of the suffering. It is doubtful that we shall ever learn the exact numbers of people who have suffered death, kidney or liver failure because of Opren. The Committee on Safety of Medicines had 332 adverses reaction reports including 77 deaths. It is generally accepted that adverse reactions to drugs are under-reported, so the actual figures will alomst certainly be higher.
Some idea of the suffering can be gleaned from this extract from a letter written to me by the son-in-law of a man who died:
My father-in-law died in March of 1986 from the now proven symptoms created by the administration of Opren, the miracle drug for arthritis. Among the cocktail of problems he endured for 4–5 years were respiratory problems, lung and liver deteriroration, and photosensitivity to the skin. Really his death ensured relief from those years of suffering".
Some people suffering photosensitivity cannot go out of their houses. They are prisoners in their own homes because they cannot be exposed to sunlight. They cannot cook or enjoy the warmth of a fire or even a warm bath. In tests on five healthy students, reported in the European Journal of Rheumatology and Inflammation 1982, two students who had taken Opren refused to continue with the planned exposure of a small patch of skin to 20 minutes in the sun because the burning pain was so intense. I hope

that, in addition to noting this information, the Government will ensure that urgent medical research into photosensitivity is carried out.
The Government are responsible for helping all sick and disabled people, but they have a particular responsibility for any drug-induced disability because it is Government procedures which determine the availability of particular medical drugs.
The relationship between the drug, consumer and manufacturer is unique. The product determines whether he or she lives or dies, is well or ill, yet the consumer swallows it with virtually no knowledge of it. He is guided by his general practitioner who is guided by the Committee on the Safety of Medicines.
Some Ministers, such as the right hon. and learned Member for Rushcliffe (Mr. Clarke), try to parody critics of damaging drugs, such as myself, and imply that we demand 100 per cent. safety. I realise that that is impossible. Nevertheless, there is a vital difference between unpredictable side effects which catch out all the world's experts, and side effects which damage patients in only one or two countries, while others with more vigilant drug regulation bodies stay unharmed.
The British Government, through the CSM, licensed Opren at a time when the United States watchdog, the Food and Drug Administration, was turning it down. Australia, Canada, New Zealand, Sweden and the Benelux countries all rejected Opren. Britain got it wrong—with terrible consequences. The Government have a clear moral responsibility to make amends.
The CSM accepted carcinogenicity tests that were rightly refused by the regulatory bodies in other countries. It licensed Opren on the basis of seriously flawed clinical trials which contained too few people taking the relevant dose and for too short a time. It accepted evidence from the company on sensitivity to the sun based on trials which took place in winter or on hospital patients not exposed to the sun. No doubt it is these issues among others which have led to the compensation settlements with United States claimants and to the approaches made to some selected British victims.
I realise that the Government cannot instruct the company on how it should pay compensation. But this horrendous affair has focused attention on the question of compensation. I have no doubt that reputable drug companies — and even the Association of British Pharmaceutical Industry—are concerned that Eli Lilly is not following the excellent example of ICI after the Eraldin disaster.
When there is a comprehensive drug disaster, there must be a comprehensive compensation scheme. A schedule of payments related to the degree of disability must be agreed.
Those damaged most should receive most, but no legitimate claimant should be overlooked. Once the schedule is agreed, it would be necessary for a claimant to argue that the damage was due to a particular drug. That is how the Eraldin scheme operated and, generally, it worked well.
This type of proposal was well on the way to being accepted by Eli Lilly in the spring of this year, but at the last moment there were instructions to call off the deal. No doubt the company calculated that the legal ruling on costs would lead to many claimants backing off. Its calculation was correct, but it had not counted on the remarkable generosity and public spirit of Mr. Bradman. I warmly


applaud his kindness and concern, and I pay warm tribute to the ability and persistence of Miss Kathleen Grasham, without whom this whole campaign could not have survived.
I want to ask the Minister if she accepts the need for meeting a comprehensive disaster with a comprehensive solution and, if so, whether she will encourage the company to offer the same compensation for British citizens as has been given to United States ones.
If the company rejects this approach, the Government should sponsor a boycott of all Eli Lilly's products where alternatives are available. They should refuse to use such products in the NHS and find sources elsewhere. In this way they would be showing that they were determined to defend the interests of British claimants and that they would not allow a powerful multinational company to use its muscle to deny justice.

The Parliamentary Under-Secretary of State for Health and Social Secur ity (Mrs. Edwina Currie): May I first offer the right hon. Member for Stoke-on-Trent, South (Mr. Ashley) the usual courtesies on his success in the ballot.
This debate concerns the non-steroidal anti-inflammatory drug—NSAID for short —Opren. The last occasion that Opren was debated in the House was in January 1983. Hon. Members might find it helpful if I begin with a brief history of the drug to help place the current debate in perspective.
In 1974, the Secretary of State and the Ministers who comprise the licensing authority, sought the advice of the Committee on Safety of Medicines on an application by Lilly Industries Ltd. for a clinical trial certificate for Opren. This was to enable trials to take place on the drug as a treatment for rheumatoid arthritis. From 1974 onwards, an increasing number of clinical trials on the drug were authorised and in 1977 the company applied for a product licence to sell and supply the drug. The CSM considered all the evidence available at the time and called for more information on a number of side effects. On receipt of this further information, the CSM advised the licensing authority that a licence should be granted and a licence was accordingly granted in March 1980. The licence and its accompanying data sheet, which was to be made available to all medical and dental practitioners to see, included data on the product approved by the Committee covering contra-indications, warnings and precautions.
During its two years of marketing, Opren, like most NSAIDs, brought welcome relief to a large number of people who suffer from osteoarthritis and rheumatoid arthritis. However, all NSAIDs are quite toxic, which is why most are available only on prescription. The most notable exception is aspirin.
Continued monitoring of adverse reaction reports takes place to ensure that only drugs whose efficacy in relation to safety are considered to be acceptable by the CSM and licensing authority remain licensed. The CSM has a statutory duty to promote the collection and investigation of information relating to adverse reactions, known as the yellow card system. Following consideration of the evidence on adverse reactions by the CSM, the licensing authority suspended the licence for Opren in July 1982 and the company withdrew the product from the world market in August 1982 and surrendered its United Kingdom

licence. Opren was withdrawn because the benefit/risk ratio was considered unacceptable by the CSM and the licensing authority.
The decision to suspend the licence for Opren was controversial. Many doctors felt that it should not have been withdrawn as many patients derived benefit from it; on the other hand, others argued that it should have been withdrawn earlier.
In the debate in 1983, referred to by the right hon. Member for Stoke-on-Trent, South, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), then Minister for Health, expressed his sympathy for all those people who felt they had suffered after taking Opren and for the relatives of those who had died. I do, of course, repeat those sentiments, which the whole House will share. However, because of the current High Court actions, I am advised that it would be inappropriate for me, as a representative of the licensing authority, to go into any more detail at this stage about the effectiveness of the monitoring of the drug and the reasons behind the decision to withdraw it.
I turn now to the current litigation but must repeat that my legal advice is that it would be wrong for me, as a representative of the licensing authority joined in this action, to make any comments today which might prejudice the outcome of the case. Both the licensing authority, which consists of the Health and Agriculture Ministers, and the Committee on Safety of Medicines, which is one of a number of statutory committees established under the Medicines Act 1968 and advises the licensing authority on the safety, quality and efficacy of new medicinal products, have been joined with Lilly, the manufacturers of the drug, as defendants in an action for negligence. These actions have been brought by a large number of plaintiffs—our records show these to be in excess of 1,300—who alleged that they or their deceased relatives have been damaged as a result of Opren treatment. The Opren Action Committee is co-ordinating the litigation on behalf of a large number of the plaintiffs. It was decided by the court that, because of the large number of plaintiffs, lead actions should be agreed between the parties and the question of any liability in these should be decided first. The remaining cases would be stayed until the liability issue in the lead actions had been decided.
The actions allege negligence on the part of the Government defendants, and these allegations can be roughly divided into two groups. The first is that sufficient care had not been taken in the consideration of the applications for the clinical trial certificates and the product licences. The CSM should not have advised that Opren should be licensed; the licensing authority should not have acepted that advice.
The second is that action was not taken quickly enough to remove Opren from the market in 1982. It must be stressed that on the advice of Government lawyers and counsel, all claims of negligence are denied categorically. During the debate on Opren in January 1983, referred to earlier, the Government defended the action taken by the CSM and the licensing authority. At this point I must make it clear once again that, while the Government have sympathy with the plaintiffs who allege some adverse effect caused by Opren, as a defendant in the case it would be inappropriate for me to debate the issues involved. I am a defendant in this case. The right hon. Gentleman was a Minister of the Crown and is well aware of the difficulties


under which he places me on an issue which is sub judice. It is also not possible for me to speak now about any question of compensation and/or settlements relating to the Opren action, nor to comment on any settlements which may have occurred in the United States. It could be prejudicial to the proceedings if the licensing authority and the CSM, as co-defendants in this action, were to express a view on the reported activity of Lilly and the plaintiffs, or were seen to take sides or otherwise to get drawn into the current public debate. I offer my apologies but regret that I cannot be more forthcoming with the House on this occasion.
Before I close I should like to make one or two general remarks which should not be taken as applying to any particular or general aspects of the Opren case. It is most important that we should remember the enormous benefits that millions of people have gained, and continue to gain, from drug therapy. People suffering from all kinds of debilitating illnesses can now find relief thanks to treatment with medicinal products, and in many cases can be enabled to lead normal lives, which would not have

been possible only a comparatively short time ago. I am an asthmatic. Common ailments such as asthma, diabetes, high blood pressure and many others can be seriously disabling and life-threatening, but a range of medicinal products for treating these conditions has been developed in recent times by the pharmaceutical industry, not least by companies based in the United Kingdom. However, the public should be aware that any medicine which can be used as an effective treatment for an ailment cannot be regarded as totally without risk, particularly in the case of a medicine available only on prescription. The advice of doctors or pharmacists should be followed whenever appropriate.
Modern drug therapy has made an enormous contribution to improving the quality of life for many people. While we all have sympathy with those who may be adversely affected on the rare occasions when something goes wrong, we must also recognise the enormous contribution to a better life made by products developed by these great industries.

Question put and agreed to.

Adjourned accordingly at twenty-seven minutes past Three o'clock.